Digital Economy Development in Europe: Patterns and Structural Disparities

Digital transformation has become a key driver of economic competitiveness, innovation capacity, and structural modernization across European economies. However, existing digital economy measurement frameworks, including infrastructure- and adoption-oriented indices, do not sufficiently capture the structural interdependencies among connectivity, market integration, and innovation ecosystems that shape long-term digital transformation trajectories. The purpose of this study is to develop a multidimensional framework for assessing digital economy development and to identify structural patterns of digital transformation across European countries. The methodological approach combines entropy-based composite index construction, Multiple Factor Analysis, RV coefficient estimation, and cluster validation to examine both performance disparities and structural interdependencies among four dimensions of digital transformation: connectivity, digital adoption, digital market integration, and digital intelligence. The empirical analysis covers European countries over the period 2004–2024 and is complemented by cluster validation procedures and the estimation of RV coefficients that describe the strength of interrelationships among digital economy components. The results reveal significant heterogeneity in digital transformation trajectories across countries. Advanced digital economies such as the Netherlands, Germany, Finland, and Denmark demonstrate consistently high levels of digital development, with index values exceeding 0.65 by the end of the observation period. At the same time, the findings indicate that connectivity and digital adoption are the most convergent dimensions of digital transformation, whereas digital market integration and digital intelligence are the most uneven across countries. Multiple Factor Analysis demonstrates that digital market integration serves as a central structural linkage connecting digital adoption to innovation-driven digital intelligence systems, highlighting that infrastructure expansion alone is insufficient for advanced digital transformation. The temporal dynamics of RV coefficients further demonstrate the growing importance of connectivity in supporting the development of artificial intelligence and data-driven innovation ecosystems. The study contributes theoretically by reconceptualizing digital transformation as a structurally interconnected developmental process and empirically by revealing differentiated patterns of digital convergence and divergence across Europe. The findings provide important policy implications for European digital strategy by emphasizing that sustainable digital advancement requires balanced investments not only in infrastructure and digital participation, but also in market institutions and innovation ecosystems.