The third-party funded project "Digital Growth: Understanding the Drivers of Firm and Industry Growth in the ICT Sector" was supported by the Ministry of Science and Culture (MWK) of Lower Saxony. The research project, which was conducted in cooperation with the research group "Business Informatics/Very Large Business Applications" of Prof. Dr. Jorge Marx Gómez, investigated the drivers and mechanisms of growth in the information and communication technology (ICT) sector. The funding was part of the program "The Digital Society" of the "Niedersächsisches Vorab," which supports basic or application-oriented projects that explore the digital transformation from the perspective of the social sciences and in which social sciences and information sciences work closely together.

The "Digital Growth" project built on the observation that while the ICT sector forms the backbone of the digital transformation and has experienced spectacular growth in recent decades, it is increasingly characterized by winner-takes-all markets and quasi-monopolies that raise barriers to entry and threaten the survival of small ICT companies. In addition, the question arose as to the extent to which technological growth drivers such as processor speed and memory density are coming up against physical limits. Against this background, the project used qualitative case studies to investigate what drives company growth and how companies can manage to survive in winner-takes-all markets. In addition, the project analyzed patent and industry data to create a better understanding of how different technologies in the industry are interconnected and collectively shape industry dynamics. The new insights will be used to derive practical recommendations on how small firms can design competitive strategies in quasi-monopolistic markets and how regulators can support digital laggards and develop early warning systems to prevent monopolies from emerging.

The key project outcomes can be assigned to both the firm and industry levels. In addition, the project also generated important cross-cutting insights.

At the firm level, the project contributed to the academic literature on firm growth as well as post-growth and degrowth. It identified four key drivers of firm growth: improved access to external financing, economies of scale, network efects and market power, and enhanced career opportunities for employees. At the same time, the results show that firms can also succeed in “winner-takes-all” markets without pursuing growth, provided they consistently implement non-growth strategies. Four such strategies were identified: reowning (focus on internal financing), servitising (focus on services), fencing (focus on market niches), and repurposing (focus on a mission beyond profit maximization). Beyond identifying these strategies, the project also shed light on how they function. Based on these findings, small firms can critically reassess and adapt their strategies to remain competitive in markets dominated by large players. At the same time, the results offer valuable insights for policymakers in countries seeking to develop a competitive ICT industry, pointing to ways in which companies can be supported more effectively.

At the industry level, the central outcome is the development of the digitization dashboard—a user-friendly platform that enables systematic analysis and strategic use of technological trends in the ICT sector. Managers, innovation leads, and analysts can use it to identify emerging technology fields such as AI, Big Data, or IoT, allocate resources strategically, benchmark market players, and detect potential bottlenecks early on (strategic R&D planning and competitive benchmarking). Researchers and educators benefit from the ability to study knowledge transfers between technology domains, validate industry life cycle theories, and simulate “what-if” scenarios for technology path development. In addition, the tool provides policymakers and regulators with the means to identify quasi-monopolistic structures at an early stage and derive measures for a more balanced and competitive ICT ecosystem.

On a broader level, the project highlights the importance of a systemic perspective. Simultaneously considering both company and industry levels enables a deeper understanding of the interdependencies and feedback loops between firm strategies and sector-specific dynamics—thereby supporting a better grasp of complex growth processes and the development of more effective policy interventions.

The developed digitization dashboard can be accessed here: https://dashboard.digital-growth.org/

More information on "The Digital Society" program can be found here: www.volkswagenstiftung.de/unsere-foerderung/unser-foerderangebot-im-ueberblick/nieders%C3%A4chsisches-vorab-die-digitale-gesellschaft

The press release from the University of Oldenburg can be accessed here: www.presse.uni-oldenburg.de/mit/2021/019.html