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The digital divide in Europe's ruralenterprisesLois Labrianidis a & Thanassis Kalogeressis aa Department of Economics , University of Macedonia ,Thessaloniki, GreecePublished online: 19 Jan 2007.
To cite this article: Lois Labrianidis & Thanassis Kalogeressis (2006) The digital divide in Europe'srural enterprises, European Planning Studies, 14:1, 23-39, DOI: 10.1080/09654310500339109
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The Digital Divide in Europe’s RuralEnterprises
LOIS LABRIANIDIS & THANASSIS KALOGERESSIS
Department of Economics, University of Macedonia, Thessaloniki, Greece
[Received July 2004; accepted October 2004]
ABSTRACT The digital divide is a concept generally defined as an inequality in access and use ofinformation and communication technologies (ICTs) between individuals, households, businesses,geographic areas and countries, and reflects a number of differences between and within countries(OECD, 2001, p. 5). The aim of this paper is to analyse the main characteristics of the digital dividein Europe’s rural enterprises. Using logit analysis, we examine the factors influencing the uptake ofICTs of 996 innovative firms from 10 European rural regions. Although significant portions of thedivide can be attributed to north-south differences, national or even regional characteristics should betaken into consideration to arrive at a more meaningful and complete typology of the phenomenon.However, it appears that spatial attributes provide a more or less static view of the phenomenon.Sectoral, firm size, as well as network intensity, to mention only a few, considerations, could allow usa greater understanding, not only of causes, but also of processes leading to the alleviation, and quiteoften the permeating of the divide. Nevertheless, it appears that among the factors that influence theuptake of ICTs, the characteristics of human capital are the most significant ones. The paper is basedon a research project (Labrianidis et al., 2002), financed by the European Union.
Rural Areas Today
Which Rural Areas?
A precise demarcation of rural areas in Europe appears today to be more difficult than ever,
due to the heterogeneous structures of rural areas, as well as their changing character. It
appears that in today’s complex reality the definitions of rural areas as the non-urban
space, or the space of agriculture and physical landscape, are inadequate and have been
vigorously questioned during the past decade, one in which the countryside has been
socially and economically remoulded. As the post war agricultural modernization
project has gradually and unevenly faded, new processes and actions, associated with
both public and private interests, have been at work producing new patterns of diversity
Correspondence Address: Lois Labrianidis, Department of Economics, University of Macedonia, Egnatia 156,
540 06 Thessaloniki, Greece. Email: [email protected]
ISSN 0965-4313 print=ISSN 1469-5944 online=06=010023–17 # 2006 Taylor & FrancisDOI: 10.1080=09654310500339109
European Planning Studies Vol. 14, No. 1, January 2006
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and differentiation within the contemporary countryside. The common trends affecting
rural areas can be separated, according to Marsden (1999), into those affecting the
entire society and those specific to rural locations. Prominent among the former are
globalization, the strengthening of free market ideology, a shift of governance to mass
participation and partnerships, the liberalization of international trade, and changes in
cultural values; while the latter include the decline in agricultural employment, the emer-
gence of environmentalism, and new uses of rural space. These processes have led to an
externalized and consumerized countryside, one which exhibits a wide range of external
relationships and is subject to wide-ranging demands.
These processes vary enormously across Europe (see the dramatic changes occurring
since the 1989 in former Eastern Bloc countries). For example, in the south-eastern
European rural areas, they have resulted in the emergence of new uses of rural space
and new societal demands on the land and landscape, not only in coastal areas and
certain islands (which have moved in the direction of tourism and holiday homes) but
also in the mainland. In parallel, there is a trend towards marginalization and abandonment
of certain areas and a growing demand for “nature” and “rural heritage” in others.
As a result, there are several definitions of rural areas. Traditionally, rural areas have been
defined as those areas given over to particular resource based economic activities, notably
agriculture and forestry, and areas of natural open space such as moorlands and mountainous
areas. Alternatively, rural areas can be defined in terms of a number of socio-spatial charac-
teristics, such as population densities and distance from major cities. Needless to say, there
are profound differences between and within European countries1 as regards their population
density and their geomorphology let alone their historical trajectories, that must be taken into
account. More recent approaches define “rural” more in terms of a social representation of
reality, placing the emphasis upon the way people strive after a rural ideal and try to
achieve this in their everyday lives (Hoggart et al., 1995). This approach is becoming
more important as the traditional production functions of rural areas (i.e. agriculture and for-
estry) decline in importance and various consumption functions (e.g. recreation and leisure)
become more significant, particularly in certain countries (Ilbery, 1998). The debate about
what constitutes rurality is therefore symptomatic of the changes occurring in the
economy and social composition of these localities in the European context.
The operationalization of the multitude of criteria into a working definition is more than
usually problematic. Therefore, the vast majority of national conventions focus upon
rather simple measures of the size of the population in a locality and/or population
density. For instance, despite the limited reliability of quantitative criteria, international
organizations (such as the OECD and EUROSTAT) usually adopt these for the definition
of rural regions as they are particularly useful for interregional or inter-state comparisons.
It can be argued that two of the few attributes common to European rural regions are rela-
tively low population densities and the significant role of agriculture in the local economy.
It is noteworthy that population density has been traditionally used in definitions of rural
areas in Europe. In particular, at the NUTS-5 level rural areas are defined by EUROSTAT
as those with a population density of less than 100 inhabitants per km2.
However, the usefulness of the above classification is questionable. In particular, the
criterion of population density is not sufficient for a robust classification between urban
and rural regions. Low population densities are not always associated with rural popu-
lations. Neither do high population densities always suggest the existence of an urban
population (Saraceno, 1994, p. 457).
24 L. Labrianidis & T. Kalogeressis
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One of the most commonly used methods of dealing with the weakness of such conven-
tions has been the building of classifications using a variety of methodologies and numer-
ous variables (see for example Copus, 1996; Malinen et al., 1994; Leavy et al., 1999;
Pettersson, 2001; Ballas et al., 2003). Although such methods often go to the other
extreme, i.e. from oversimplification to extreme complexity, they provide better, even
though often highly contextual, representations of the complex and varying conditions
of Europe’s regions. Using any of the conventional measures of rurality, many of the
regions that were the sources of the data on which most of the remainder of this article
is based on, would not be considered to be rural.
It should therefore be clear that what we consider as rural is not only the spaces which
are thinly populated, or even those dominated by agriculture. Rather we argue (following
Ferrao & Lopes, 2004) for a holistic approach towards understanding economic develop-
ment conditions and processes in rural areas. According to Ferrao and Lopes (2004), such
an approach would have to be based on a multi-dimensional and territorialized view,
encompassing seven dimensions:
(1) environment and landscape (endowment in natural resources, rural amenities);
(2) settlement pattern and the demographic dynamics (population density, age structure,
migration patterns);
(3) quality of life (access to collective facilities and infra-structures, mobility);
(4) human capital (values, attitudes, skills, capabilities) and social capital (identity, sense
of belonging, networks);
(5) economic profile (economic externalities, entrepreneurship, multi-functionality,
long-term competitiveness);
(6) institutions (collective actors, governance, policies);
(7) territorial integration into broader spaces (rural–urban interdependency, local–global
interplay).
A Changing Rural Europe
At the dawn of a new millennium changes in the international division of labour in Europe,
together with rapid advances in information and communication technologies (ICTs) offer
rural localities a combination of opportunities and threats that is qualitatively different
from earlier historical precedents. More specifically, the long-term process of structural
change away from agricultural pursuits has been intensified as a result of changes in
policy, such as the review of the Common Agricultural Policy and the General Agreement
on Tariffs and Trade. Enterprises, mainly large ones and those in northern Europe, that are
operating outside agriculture, are now finding it more and more profitable to outsource
increasing amounts of productive activity to global production and distribution networks.
Economic growth in rural peripheral areas is closely associated with the entrepreneurial
capacity of the local population. This is not particularly unexpected given that the specific
characteristics of these economies imposed considerable constraints upon the influx of
sizeable investment projects. However, the supply of potential entrepreneurs confronting
the threats and exploiting the opportunities available in the countryside is by no means
guaranteed. This is because those who could reasonably have been expected to perform
the entrepreneurial function may well have been the first to seek to out-migrate to more
inviting urban areas.
The Digital Divide in Europe’s Rural Enterprises 25
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More recently, rural peripheral areas in Europe have benefited either by a wave of
immigration by relatively affluent, former urban dwellers (in countries such as the UK,
Portugal and Italy) (Clout, 1993) or by the fact that out-migration flows from rural
areas have declined in conjunction with a trend towards return migration of economically
active people to semi-urban areas (e.g. Greece in the 1980s and 1990s). The arrival of
these new inhabitants has had significant economic consequences. They often possess con-
siderable expertise in management, information, and contacts, as well as the finances
necessary to initiate new venture formation. Therefore, a significant minority of these
new inhabitants soon became involved in entrepreneurial activities, expanding the
number of enterprises in rural peripheral areas.
Another set of economic actors instrumental in the process of redefining the rural milieu
includes the multitude of agencies involved in policy decision-making. Increasing aware-
ness of the specificities, as well as the problems associated with the rural, and the ensuing
adoption of a pro-active approach at all levels of decision-making means that the role of
policy agencies becomes increasingly important in the development of rural Europe.
However, depending on the type of agency concerned, their outcomes may lead to conver-
gence, as well as divergence. More specifically, during the post-war era the European
Union (EU), as a supranational policy organization, has been of paramount importance
in the development of initiatives and actions transcending national boundaries. At the
same time national and regional policy agencies reflecting distinct historical processes
at work have been instrumental in generating diversity; often a reflection of diverging
local and/or national realities.Technology and knowledge constitute key elements in the external environment with
the potential to both enable and hinder the entrepreneurial processes in rural peripheral
areas. In fact, there is a growing belief among some researchers that knowledge is the
most important source of local economic transformation (Lundvall, 1992). This is particu-
larly true regarding parts of knowledge involved in untraded interdependencies (uncodi-
fied know-how), which cannot be dissociated from its human and social context.
Consequently, issues such as the institutional capacity of the area, the capabilities of
the political leadership, as well as social rules of conduct and human values, emerge as
of equal—if not greater—importance than physical factors (such as product markets
and markets for factors of production) in the entrepreneurial process (Doeringer
& Terkla, 1990; Putnam, 1993), which is heavily differentiated between countries.
At the same time, however, advances in ICTs support a more positive evaluation of the
development prospects of the countryside (Kalantaridis, 2004). Endogenous economic
advancement in sparsely populated and remote areas may be encouraged through the
uptake of ICTs (Analysys, 1989). Moreover, there is growing empirical evidence support-
ing the proposition that rural enterprises, by virtue of their location, are becoming more
pro-active in the pursuit of distant and often overseas markets (Smallbone et al., 1999).
The Importance of ICTs
During the last decade the beneficial role of ICTs on development has become a kind of an
axiom, at least to the casual reader. Undoubtedly, the rapid developments at the inter-
section of ICTs have played a major role in facilitating and accelerating the process of
knowledge codification and transmission over long distances. The widespread application
of ICTs is the most important contributory factor in overcoming the “friction” of time and
26 L. Labrianidis & T. Kalogeressis
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space. They constitute the “enabling technologies”, a fundamental prerequisite for the
evolution of international production (Dicken, 1998).
ICTs and Development
The relation of ICTs and development has been an issue of great concern for economists
since the early 1980s. A number of studies conducted around the end of that decade (for
a review of the relevant literature see Brynjolfsson & Yang, 1996) found no significant
(if any) impact of ICTs on the productivity at firm, industry or country level. This incon-
sistency was coined “the productivity paradox” of computers and throughout most of the
relevant literature Robert Solow’s2 comment, that “you can see the computer age every-
where but in the productivity statistics”, is thought of as the most appropriate depiction of
the situation.
Later on, during the 1990s, the use of larger firm level samples, time series data, and
different methodologies resulted in a series of papers refuting the productivity paradox
(for a review of the more recent relevant literature see Dedrick et al., 2003). Increased
ICT use is now considered to increase labour productivity at the firm, industry and
country level, and in most cases to positively affect Multi-factor Productivity. This litera-
ture was apparently the cause for a number of quite exaggerated newspaper articles about
the impact of the “new economy”. The exaggeration was largely due to the fact that one
very important point of the academic literature it was based on was ignored. Specifically,
while the positive relationship of ICTs and productivity is true, it is characterized by a sig-
nificant variability (Brynjolfsson & Hitt, 1998) largely attributed to firm specific variations
in changes in strategy, business processes and organizational structure.
In other words, investment in ICT is simply not enough. In order to have a considerable
impact, it requires different structures, flatter organizations, decentralized decision-
making, which are often much more difficult and costly to implement (Brynjolfsson
& Hitt, 1998). This is particularly true for rural firms.
The Impact of ICTs in Rural Areas
ICTs, by providing a fast and reliable quality service at reasonable cost regardless of
geographical location, could reduce regional disparities in economic activity and employ-
ment. Hence, they are very important for rural areas that are characterized by geographical
isolation and problems of access to urban areas. Additionally, it is argued that the benefits
of ICTs are of particular importance to rural firms, enabling them to overcome the friction
of distance and the scattered and fractured nature of their local markets. They appear to
provide the possibility of transcending the geographical marginality of rural areas and
regions in the delivery of services and the location of economic activity.
Nevertheless, some researchers have expressed caution, considering theorizing about
the potential impact of ICTs in at least two, quite different, directions. The first direction
is more fundamental, criticizing the “hype” regarding ICTs (particularly the Internet), as
being more or less unsubstantiated. Gordon (2000) argues that the “New Economy”,
spearheaded by ICTs and the computer in particular, may provide nothing more than
better ways to do things that could already be done. In this context, the recent inventions
(i.e. the computer or the Internet) do not constitute the third industrial revolution, and the
changes they bring cannot be compared to those brought about by pre-World War II
inventions such as the internal combustion engine or the telephone, to name but two.
The Digital Divide in Europe’s Rural Enterprises 27
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The second direction is more specific to the impacts on rural areas, the reduction of
distance and inaccessibility of which is thought to be overly optimistic. Instead, a likely
outcome could be a further widening of the income gap between urban and rural areas,
coupled with a digital divide. On the one hand, as Marsden (1999, p. 513) argues, although
these technological changes are providing new options and tools for rural development,
they also pose a threat, since they could expose rural markets to new competitors
serving them from a distance. Without public support it is likely that, in an increasingly
deregulated and privatized market, rural areas will be at the back of the queue for the
necessary investment in infrastructure and training.
A much more serious concern, on the other hand, is related, not to the availability of
infrastructure, but to the ability of rural areas to explore the new opportunities, or in
other words, the existence of mechanisms capable of transforming technology into inno-
vation. The role of the local (regional) environment in the organization of economic life,
and consequently development, has been very high on the agenda of many strands of social
science (for reviews of the relevant literature see Storper, 1995, Labrianidis et al., 2004).
During the last three decades the concept of the region has been elevated to one of the
central themes of economic analysis. However, whether one speaks about”institutional
thickness” (Amin & Thrift, 1994), “intelligent regions and collective entrepreneurship”
(Cooke & Morgan, 1994), “regional innovation systems” (Braczyk et al., 1997),3 “organ-
izational learning and un-learning” (Maskell & Malmberg, 1999), “tacit knowledge and
untraded interdependencies” (Storper, 1995) or “the learning region” Asheim (1996),
what is of primary importance is that innovation and growth is an outcome of both econ-
omic and social processes (Hassink, 1997).
One of the main drawbacks, particularly when researching the rural, is that the existing
literature is either concerned with (or draws heavily on) a few atypical successful cases of
regions, or the impact of institutions and organizations very rarely found in rural areas
(i.e. R&D centres, universities or large oligopolies). It is evident that a rather different
approach is required when it comes to rural areas, one which would ideally take into con-
sideration the existing literature, while at the same time looking into more rural specific
issues.
Is There a Digital Divide?
In 1968, 1 year before the launching of the programme that would be the ancestor of the
Internet4 (the US Defense Department’s ARPAnet), an article titled “The Computer as
a Communications Device” was published in the June issue of the Science and Techno-
logy Journal. The authors were J.C.R. Licklider and R.W. Taylor, the former having
invented the mouse and a host of other devices and applications still used today, while
the latter is considered to be the forefather of the Internet. The text is full of ideas
about the future of computer networking that would certainly stun most early twenty-
first century readers.
However, one of the most interesting points is found at the closing section of the text
where the authors argue that:
For the society, the impact will be good or bad, depending mainly on the question:
Will “to be online” be a privilege or a right? If only a favored segment of the
population gets a chance to enjoy the advantages of “intelligence amplification,”
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the network may exaggerate the discontinuity in the spectrum of intellectual
opportunity. (Licklider & Taylor, 1990, p. 40)
What these two brilliant computer engineers thought of as a potential threat (and in fact
the only one) of what would become the Internet, appears to be an unpleasant reality
34 years later.
If one was forced to make a single statement regarding the global ICT status quo, it
would most likely be related to the unquestionable (in most aspects) primacy of the US.
According to the International Telecommunications Union (ITU), in 2002, 73.2% of the
world’s Internet hosts were located in the country. By comparison, the respective figure
for the whole European continent (including Russia) was a meagre 11.6%, while Africa
accounted for no more than 0.15%, which becomes 0.03% if we exclude South Africa.
Hence, equal access to everyone still remains largely a myth since it is highly concentrated
in the most economically developed parts of the world, and, as Warf (1995) argues, the
geography of the Internet appears to reflect and consolidate previous rounds of capital
accumulations, leading to new rounds of uneven development and spatial inequality.
Moving to a lower level of analysis, there appear to be significant international inequal-
ities. In the European context, there are significant differences in both the ICT infra-
structure and usage. The creation of ICT infrastructure networks in less developed areas
has been among the main priorities of the EU since the introduction of the Community
Support Frameworks in the 1980s. Access to such networks could potentially help over-
come a number of physical and geographical obstacles and reduce spatial disparities.
Despite the considerable progress that has been made over the past 10 years in reducing
existing disparities in telecommunication infrastructure across the EU, such disparities
still exist.5
While the average number of Internet hosts per 10,000 inhabitants in the continent in
2002 was 230, the respective figure for Finland was more than 10 times higher (2343).
However, the majority of Central and Eastern European countries had fewer than 100.
A remarkable feature of this classification is the progress of the Baltic6 and the Visengrad7
countries, which appear to be more active than the four southern EU members. Not unex-
pectedly, a similar division between on the one hand northern and on the other hand
southern and eastern European countries emerges when it comes to the number of compu-
ters in the economy. More specifically, in all Scandinavian and some western European
countries there is more than one personal computer (PC) per two inhabitants, while the
respective ratio for Greece (the country with the lowest rate of per head computer owner-
ship among all, older as well as recent, EU members) is one PC per 12 inhabitants. When it
comes to the impact of the Internet (as measured by the number of users per 10,000 inhabi-
tants), although the differences are significantly smaller, the geographic patterns remain
more or less unaltered. Finally, this is also true for the newer technologies such as broad-
band networks. The penetration of DSL in Greece was only 2% in 2003, while a number
of European countries such as Belgium, Denmark and Finland had already exceeded the
10% mark.8
Nevertheless, perhaps the most impressive differences in ICT endowments and usage
are found in the sub-national level. Internet access among households in urban areas is
greater than in rural areas all over the world (i.e. Canada 32.6% in urban and 23.7% in
rural; Japan 17.7% and 13.6%; Netherlands 28.7% and 22.7%; US 42.3% and 38.9%;
OECD, 2001). In Greece, in 2002 74% of all urban households owned a computer,
The Digital Divide in Europe’s Rural Enterprises 29
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79% of which had access to the Internet. The respective shares for rural areas were 11%
and 9% (GMNE, 2002). Members of households in urban areas are more likely to have
occupations where computers and the Internet are part of their work environment. Costs
tend to be higher and quality of access lower in rural areas, despite some efforts to
ensure standardized pricing and quality (OECD, 2001).
The discrepancies observed during our study in Greek regions are illustrative in this
respect (Labrianidis et al., 2002). New technologies that could allow stable and faster con-
nections (e.g. ADSL) are technically difficult to implement in rural areas and usually more
expensive. Furthermore, incomes tend to be lower in rural areas and ICT costs are rela-
tively higher for low-income groups (OECD, 2001, p. 24). Even in the US, where rural
areas are already considered to be “digital” (Malecki, 2003, p. 202), there are significant
differences in communications infrastructures, with broadband penetration ranging
between 21.2% and 22% in central city and urban areas, while the figure for rural areas
was only 12.2%.
Evidence from several European countries suggests such investment is concentrated in
large urban areas, particularly in sectors that are major users of new technologies such as
software and telemarketing. One of the main constraints of advanced telecommunication
networks is the need for commercial viability. Network providers prioritize densely popu-
lated areas where returns are higher, i.e. a “virtuous cycle” in which strong demand for
advanced telecommunications produces innovation and high level of service, which in
turn increases the level of demand (Grimes, 2000). Not all places around the globe
benefit from technological innovations in transport and telecommunications. While the
world’s leading national economies and the worlds major cities are pulled closer together,
other, less industrialized countries or smaller towns and rural areas are, in effect, being left
behind (Dicken, 1998).
Moreover, apart from the distribution of physical infrastructure there are other import-
ant issues related to intangible infrastructure. For example, the rural population does not
seem to have benefited sufficiently from such services. Investment in education is crucial
to ensure that local people are properly equipped to exploit and benefit from such technol-
ogy. There is little point in connecting villages to the Internet if most people are not fam-
iliar with such technology. Certain researchers suggest that user-resistance arises to some
extent from techno-phobia (Clark et al., 1995). Although the continuous out-migration of
young population from rural areas deprives them of potential users to a small extent, this
lack of dynamism can be alleviated by in-migration of professionally skilled outsiders
having established contacts with core regions (Grimes, 2000).
At the heart of the issues studied here lie not the statistics regarding the ICT infra-
structure and usage (which, nonetheless, raise very important issues), but the actual
implications of ICTs for the development of rural areas.
The Causes of the Digital Divide
The level of development is apparently a very significant factor, as it more or less defines
the availability of ICT infrastructure, the investment in R&D, as well as in tertiary and
technical education. At the country level (Figure 1), the Pearson correlation coefficient
between the level of development (measured by the GNI per capita) and the Internet
use intensity was very high (0.818).
30 L. Labrianidis & T. Kalogeressis
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National or local specificities embedded in national or local historical trajectories
(usually extremely difficult to account for analytically), such as the condition of civil
society, the formal or informal institutional setting are factors highlighted throughout
the literature, as in fact throughout the FERP (Future of Europe’s Rural Peripheries)
project (Labrianidis, 2004), as of primary importance in explaining differences in attitudes
and endowments, not only regarding ICTs, but also, almost every other aspect of the
current situation of rural areas. Nevertheless, other, more easily quantifiable, factors
have also been found to affect the use of ICTs. At a macro level, the availability of ICT
infrastructure, the investment in R&D, as well as in tertiary and technical education,
and last but not least, the cost of use are very significant factors.
The existence of an educated workforce appears to be a critical factor in the uptake of
advanced technology. In a study regarding the use of advanced technology in rural coun-
ties of the US, McGranahan (2002) identified the proportion of high school, and possibly
some college, education as one of the few statistically significant variables affecting the
use of high technology by rural firms. The quality of the indigenous workforce (usually
approximated by the level of education) is one of the two shaping factors of the population
capabilities of rural areas. The other is the role of in-migrants, often thought of as a sig-
nificant intellectual input to the generally deprived rural setting (Beyers & Nelson, 2000;
Grimes, 2000). In-migrants are often more educated than locals and usually have signifi-
cantly more entrepreneurial experience and established contacts in urban areas. This prob-
ably explains why in (at least some) rural areas it is the jobs that follow people (Vias,
1999), and not the other way around.
Larger firms tend to use advanced ICTs more than smaller ones. One of the reasons for
this is larger firms having the liquidity needed to finance investments in ICTs. Further-
more, certain business functions, such as accounting, personnel, management and market-
ing are more highly differentiated in large firms, increasing the scope for the use of
more specialized ICT services (Clark et al., 1995; Mitchell & Clark, 1999). An additional
reason is the fact that ICT equipment quickly becomes obsolete, rendering small and
medium-sized enterprises (SMEs) reluctant to invest (Clark et al., 1995), something
Figure 1. Plot of GNI per capita and Internet users per 1000 population for 95 countries. Source: ITU(2004) for Internet users and World Bank (2004) for GNI per capita
The Digital Divide in Europe’s Rural Enterprises 31
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that is usually truer for the most advanced technologies. The significance of size is clear in
empirical analysis, where it often turns out to be the most consistent explanatory variable
of ICT use (McGranahan, 2002).
Empirical Findings
The empirical findings were derived from the FERP project, whose main objective was the
analysis of the impact of entrepreneurship on the development of European rural areas. For
the purposes of the Project, a questionnaire dealing with a number of aspects of entrepre-
neurship (including the use of ICTs) was addressed to approximately 100 innovative9
firms from 10 European NUTS-3 case study areas (CSAs) in Germany, Greece, Poland,
Portugal and the UK.
The respondents (who were either, owners, CEOs, or senior managers of the firms
investigated) were asked whether their firms were using any of a list of ICTs.10 Not sur-
prisingly, German firms displayed the greatest propensity towards using any type of ICT,
with 93% of all firms using an ICT application. German firms were trailed (although by
some way) by UK firms (75.5%), while in the three other countries the share of firms
using any type of ICTs ranged between 45–56%, with Polish firms being the worst per-
formers. The results appear to validate the importance of national factors in the uptake
of ICTs by rural firms, as they closely resemble the respective overall national distribution
of ICTs (ITU, 2004).
With regards to the specific applications used, the use of e-mail and the existence of an
enterprise website were the most important applications in all countries. The only excep-
tions were the Portuguese firms, where the second most often used ICT was management
information systems (MISs) (Figure 2). This last finding, coupled with the relatively high
share of Greek firms using MISs is particularly interesting, as it could indicate an organ-
izational restructuring towards more horizontal information flows and even decision
Figure 2. Relative significance of specific applications in firms using any type of ICTs. Source:Elaboration of data from FERP project (Labrianidis et al., 2002).
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making structures, and away from the prevailing hierarchical models in southern European
firms.
Furthermore, the local context, which is interpreted here in terms of territorial dynamics
(denoted in terms of a set of local or regional economic, social, demographic and environ-
mental factors—OECD, 2002), appears to be important in shaping the attitude of firms
towards ICTs. In this context, in countries where the industry structure or the economic
condition of the two CSAs was different (in our case Greece, Portugal and to a lesser
extent Poland), the intensity of use of different ICTs varied significantly. In Greece,
firms in the prefecture of Kilkis fared better in almost all aspects of “high technology”
use than their counterparts located in the remote, and less developed, Lesvos island (see
left panel of Figure 3). Furthermore, the prevalence of manufacturing in Kilkis, as
opposed to services in Lesvos, was reflected in the importance of production technologies
(i.e. CAD and CAM) in that area, something that is also true for Bialystok (Poland) and
Baixo Alentejo (Portugal) where CAM was relatively more important than in the other
CSA in both countries (i.e. Zary in Poland and Oeste in Portugal, areas which, incidentally,
are more central and developed).
The earlier descriptors seem to confirm the existence of a digital divide between
European rural firms. The first question that naturally arises is: “what are the causes of
this divide?”
The Analysis
According to Mitchell and Clark (1999), one of the major shortcomings of the research
regarding the factors that lead rural firms to adopt ICTs is the fact that “. . . interest inresearch (. . .) was traditionally placed upon adoption by areas rather than businesses”
(Mitchell & Clark, 1999, p. 447). We argue that both areas (i.e. regional or national
characteristics) and businesses (i.e. firm characteristics) are important. However, and in
addition to those two sets of factors, we further argue that, especially in the context of per-
ipheral and less developed regions, a significant (however, by no means the only) agent
determining ICT adoption and use is the entrepreneur.
Figure 3. Differences in the relative significance of specific ICT applications by CSA in Greece andPoland. Source: Elaboration of data from FERP project (Labrianidis et al., 2002).
The Digital Divide in Europe’s Rural Enterprises 33
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We therefore argue that the use of any type of ICTs is affected by three broad sets of
factors, namely:
(1) local–national setting related factors (accessibility, relative size of the locality in
terms of population, as well as other unobservable factors represented by the CSA
or country variables),
(2) firm characteristics related factors (size, in terms of employment, sector, access to
support measures, and network intensity),
(3) entrepreneur characteristics related factors (education, age and whether the entrepre-
neur is indigenous or in-migrant).
With the dependent variable being binary (using or not using any ICTs) a simple logit
model was built to investigate the relationships between the use of ICTs and a number
of explanatory variables.
The exploration began with a large number of variables, the least significant of which
were eliminated (using the Wald criterion) in order to arrive at a parsimonious model
(Table 1). The variables eventually eliminated were related to the share of inputs from
the locality as a share of the total inputs, whether the firm owners were in-migrants,
whether the firm had developed new markets during the last 2 years, a variable measuring
the accessibility of the locality, and finally, the size, in terms of population, of the locality.
Regarding the first group of factors, the first finding is the significance of the national, as
well as the local context, although significant differences appear to exist between
countries. In this context, in two countries (Portugal and Germany) there appear to be
very few regional variations, since the coefficients for the two CSAs in each county are
very similar. At the other end of the spectrum is the UK, with the firms in Devon and Corn-
wall being much more likely to adopt ICTs than the ones in Cumbria. In the other two
countries there do not appear to be significant differences between the two regions, with
the firms from Bialystok being the worst performers (in fact they were the only group
less likely to adopt ICTs than Lesvos, which was the base region).
Another aspect regarding the same variable (CSA) was the evident divide between the
northern CSAs (except Cumbria) and the remaining ones. The enormous differences are
illustrated by the odds ratios, which compare the probability of a firm from Lesvos (the
base region) using some ICT with the respective probabilities of the other areas. Hence,
a firm from Oeste was 2.9 times more likely to use some ICT than a firm from Lesvos,
while firms from both German areas were almost 13 times more likely to use ICTs.
The inclusion of the remaining two variables (i.e. size of settlement the firm was located
in, and type of area, which was an intra-regional accessibility measure) of the first group
appeared to reduce the quality of the model, and were thus excluded from the analysis.
This is a quite interesting finding, since it could imply that the (very) small scale (i.e.
intra-NUTS-3) does not affect the decision to adopt ICTs, as much as the wider
regional—and to a large extent national—differences.
Moving on to the enterprise characteristics, firm size (measured as the log of the
workforce in year 2000) was in all cases found to be a statistically significant influence
in the adoption of ICTs. The importance of size became much more evident when the
uses of ICTs were disaggregated into “basic” and more “complex” uses with the majority
of small firms concentrated in the former category while being almost absent from the
latter.
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Another very interesting finding relates to the assistance received by the firms from any
support programme (locally, nationally or EU funded) during the last 5 years. Firms that
did receive some support were twice as likely to be using ICTs than firms that were not
supported. Although there appears to be some generalization in the above finding since
Table 1. Logit regression on the use of ICTs
B Wald Odds ratio
Case study areaLesvos 110.353 ���
Kilkis 0.829 5.119 �� 2.29Oeste 1.079 6.233 �� 2.94Left Bank 0.674 3.001 � 1.96Nordwestmecklenburg 2.569 26.668 ��� 13.06Waldshut 2.618 27.774 ��� 13.72Bialystok –0.611 2.430 0.54Zary 0.446 1.364 1.56Devon and Cornwall 3.832 60.846 ��� 46.16Cumbria 0.611 2.820 � 1.84Employment 0.336 14.478 ��� 1.39SupportSupported 0.701 10.499 ��� 2.01SectorPrimary sector 18.881Manufacturing 0.741 6.794 ��� 2.1Construction 0.596 1.476 1.81Trade (wholesale and retail) 0.933 7.802 ��� 2.54Hotels and restaurants 0.558 1.619 ��� 1.75Transport 0.482 0.689 1.62Other services 3.883 12.913 ��� 48.56Business services 0.774 4.235 �� 2.17Age of the entrepreneur18–29 14.85030–39 –0.157 0.1913 0.8540–49 0.047 0.018 1.0550–59 –0.622 2.745 � 0.5360þ –1.006 5.605 �� 0.36Level of educationNone 31.119 ���
Primary school 0.756 3.553 � 2.13Secondary school 1.213 8.324 ��� 3.36Technical college 1.698 16.893 ��� 5.46University graduate 2.320 23.140 ��� 10.17University postgraduate 2.133 18.252 ��� 8.44Recent changes in processesYes 1.410 51.016 ��� 4.1Constant –3.890 36.841 ��� 0.0222 log likelihood 805.04Nagelerke R 2 0.472
Significance levels: �p , 10%, ��p , 5%, ���p , 1%.
Note: Categories in parenthesis are the “base categories”. The choice of these affects (quantitatively) the coeffi-
cients and the odds ratios, however not the overall quality of the model.
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the variable includes a host of finance sources and types of assistance, policies appear to be
a major determinant of take-up.
The differences between the sectors were more or less in accordance to those reported in
the literature, with some service sectors (business services, other services, hotels and res-
taurants and trade), as well as manufacturing being more likely to use ICTs than the
primary sector and the remaining service sectors (transport, construction).
The possible role of in-migrants appears to be one of the most striking features of the
analysis. Most of the literature contends that in-migrants have a potentially very significant
role to play in upgrading the capacities of the local populations. In our analysis that argu-
ment was not confirmed since this specific variable was one of first to be rejected from the
model. This finding should not be accepted uncritically: in-migration to rural areas is not
happening concurrently in all areas nor is its effect the same across the whole continent.
Therefore, national variations are still very significant. In countries like Greece or Poland
the phenomenon is very recent and appears to affect rural areas in very different ways than,
for example, the UK. In this context, the propensity of in-migrants towards entrepreneur-
ship in the Greek regions was found to be lower than that of the indigenous population,
while in the British regions it was significantly higher.
Young business owners (18–29) are more likely to use ICTs than any other age group,
the relationship appearing to be more or less linear (the older an entrepreneur, the less
likely he/she is to use any ICTs). Nevertheless, there appears to be a threshold at the
age of 50, since the coefficients for the two age groups below that age are not statistically
significant. The older age group is three times less likely to use ICTs than those aged
between 18–29.
Not unexpectedly, education appears to be (along with CSA) the most significant vari-
able in explaining the uptake of ICTs. In this case the linear relationship is much clearer,
although not at the margins, since those with no education display similar characteristics to
those with only primary education, and similarly for university graduates and postgradu-
ates.
The last variable included in the analysis indicates a strong relationship between the use
of ICTs and the implementation of changes in business processes during the last 2 years.
We therefore have some indication that European rural firms appear to be ready to comp-
lement investment in ICTs with investment in restructuring. Although the preceding
analysis does not reveal the mechanisms, or the causalities of this relationship, a separate
regression was run, where the dependent variable was the estimation of the impact of Inter-
net on the firms’ performance. Apart from CSA, where significant differences were found,
the only other variables left in the model were steps towards the development of new pro-
ducts and recent changes in processes. In other words, ICTs have very small, or no impact
on firms when they are not accompanied by significant changes in structure or productive
processes.
Conclusion
The problems faced by rural areas in Europe are similar to those faced in most parts of the
world, developed or not. When it comes to rural enterprises, the restricted and dispersed
nature of their markets due to low population densities appears to be the main development
constraint, while access to larger and more distant markets emerges as the most significant
challenge.
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This paper was an effort to assess the determinants of the use of high technology, and
ICTs in particular, in 10 European rural areas which were very different, in terms of
location, socio-economic background and economic condition. The differences observed
paint quite a disappointing picture in terms of regional disparities, as well as progress
towards ameliorating them. In the most developed countries—in our case Germany and
the UK—rural firms appear to be more or less “digital”, while in the less developed
ones adoption has been much slower. With the possible exception of the Polish rural
areas, this can only in part be attributed to variations in infrastructure. Although there
are significant differences in the availability of new and more efficient networks (such
as broadband networks), they can hardly account for the significant differences recorded.
Furthermore, although the supply of infrastructure is vital, it is demand that will eventually
shape the use of such services. There are numerous examples of leading edge infrastruc-
ture implementations in rural areas being underutilized by the local firms (Grimes, 2000).
This explains why the level of education of entrepreneurs is perhaps the single most sig-
nificant determinant of the use of ICTs. Using the “translations” identified by Cornford
et al. (1996), a higher level of education is required for users (rural firms) to translate
an awareness of what is on offer (ICT services) into practical adoption. However, for
the two final translations, i.e. from adoption to effective usage and from effective usage
to competitive advantage, a higher level of education is apparently necessary but not suf-
ficient. What is required is a dialectic process between ICTs and the business processes,
which will most likely lead to the modification of the latter. In other words, it is the restruc-
turing of business that will determine the impact of ICTs on European rural firms.
Notes
1. In fact Europe is a densely populated continent and its countryside is characterized by a great diversity in
many respects (i.e. territorial characteristics, climate, economic structure, etc.).
2. Solow, R. (1987) We’d better watch out, New York Times Book Review, 12 July.
3. Braczyk, H. et al. (Eds) (1997) Regional Innovation Systems (London: UCL Press), as mentioned in
Hassink (1997).
4. Although it should be noted that what is widely known as the Internet today (i.e. the World Wide Web,
WWW) was invented at CERN in the early 1980s. Until then, the Internet was about remote access,
e-mail and file transfer (in fact, in 1993 the WWW was only 1% of the total Internet traffic— http://
public.web.
cern.ch/public/about/achievements/www/history/history.html—and was only accessible by a few
research institutes around the world, with extremely limited—if any—direct social impacts.
5. In EU countries there are between 31 and 79 main lines per 100 inhabitants. The leader being Luxemburg
with 79 lines per 100 inhabitants while the new member countries have much fewer (i.e. the Slovak
Republic 31, Hungary, Poland and the Czech republic between 40 and 42 lines). Digital systems
account for 100% of lines in all countries except Spain and Greece where the respective shares are
87% and 96%. The situation in the new 10 members is slightly worse, ranging between 74% in the
Slovak Republic and 95% in the Czech Republic (OECD, 2003).
6. Estonia, Latvia and Lithuania.
7. Czech Republic, Hungary, Poland, and Slovak Republic.
8. www.DSLforum.org
9. The innovativeness of firms should be treated quite tentatively, since one of the main selection criteria
was the conception of innovativeness of the interviewees themselves.
10. In fact, the list included ICTs [(e-mail, video conferencing, website, electronic data interchange (EDI)
and management information system (MIS)] and two other relatively “high tech” (at least in a rural
context) applications [(i.e. computer aided design (CAD) and computer aided manufacturing (CAM)].
Furthermore, respondents were allowed to insert non-listed ICT applications. The only country where
The Digital Divide in Europe’s Rural Enterprises 37
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non-listed application were of some significance was Portugal (slightly more than 10% of the
interviewed firms had used some other type of ICT).
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