The Challenges and Opportunities of Digital Transformation and E-Commerce in Europe & Central Asia

English

Abstract

This paper explores the opportunities and challenges of digital transformation and e-commerce
for small and medium enterprises (SMEs) in Europe and Central Asia (ECA). The paper
reviews the literature on the benefits and barriers of digital technologies and e-commerce
platforms for SMEs, and analyzes the data from a cross-sectional survey of 1,000 SMEs in
ECA. The paper uses a vector autoregression (VAR) model to examine the causal relationships
between customer-based strategy (CBS), e-commerce adoption, and SME performance
indicators. The paper finds that digital transformation and e-commerce have positive effects on
SMEs’ sales growth, profitability, productivity, and innovation. However, the paper also
identifies several challenges that hinder SMEs’ digital transformation and e-commerce, such
as high costs, security risks, regulatory barriers, skills gaps, and competitive pressures. The
paper suggests some policy recommendations to support SMEs’ digital transformation and ecommerce in ECA, such as providing financial incentives, enhancing cyber security,
harmonizing regulations, developing digital skills, and fostering collaboration.