Digital divide, craft firms’ websites and urban-rural disparities—empirical evidence from a web-scraping approach

Abstract

Following the “death of distance” postulate, digitalization may reduce or even eliminate the penalty of firms being located in rural areas compared with those in urban agglomerations. Despite many recent attempts to measure digitalization effects across space, there remains a lack of empirical evidence regarding the adoption of digital technologies from an explicit spatial perspective. Using web-scraping data for a sample of 345,000 small firms in Germany, we analyze the determinants of website prevalence. Comparing urban with rural areas, we show that running a website—as a proxy for the degree of digitalization of the respective firm—is highly dependent on location, whereby firms in urban areas are almost twice as likely to run websites compared with those located in rural areas. Our county-level analysis shows that a high population density, a young population and a high educational level have a positive and significant association with the probability that firms run websites. Surprisingly, we find a negative and significant association of gross domestic product per capita with website prevalence, which is driven by urban regions. There are no differences between urban, semi-urban and rural areas in terms of website up-to-dateness as well as social media prevalence. We conclude that there is a substantial digital divide and discuss policy implications.

An urban-rural divide (or not?): Small firm location and the use of digital technologies

“…whether or not high-speed internet access is available). Both are often seen as a locational disadvantage of rural areas, potentially limiting the ability of rural SMEs to seize the benefits of digital ICT (van der Loo et al, 2015;Palmer-Abbs et al, 2021;Thonipara et al, 2022). A second-level digital divide between rural and urban areas may exist in terms of ICT usage and the availability of relevant skills and capabilities.…”

“…A second-level digital divide between rural and urban areas may exist in terms of ICT usage and the availability of relevant skills and capabilities. In these cases, driving factors such as the qualification and age of the workforce may be weaker in rural companies than in urban areas, which could leave small firms in rural regions at a long-term disadvantage in the digital transformation process (Richmond et al, 2017;Fanelli, 2021;Thonipara et al, 2022). Hence, there are two further working propositions.…”

“…Indeed, there is some empirical evidence that small rural firms are lagging behind in the context of digital transfor-mation due to an urban-rural divide, at least in certain aspects (e.g. in terms of broadband connectivity or the use of online marketing; see e.g., Richmond et al, 2017;Palmer-Abbs et al, 2021;Thonipara et al, 2022).…”

“…As a result, other digital ICT in business functions such as production, logistics or administrative operations tend to be neglected (see e.g. Richmond et al, 2017;Palmer-Abbs et al, 2021;Thonipara et al, 2022). Second, this paper adds to studies examining the general validity of an urban-rural dichotomy in explaining differences in economic and innovation performance between SMEs from different spatial contexts (e.g.…”