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The Answer to the Big Digitalisation Paradox Has Been Found

Using modern digital technologies doesn’t boost company profits in the short term – but it does improve asset efficiency in the global automotive industry. That’s the key finding of a recent international study involving Corvinus University of Budapest.
Budapesti Corvinus Egyetem

The so-called productivity paradox of digitalisation has puzzled economists for years: despite heavy investment in new technologies, the expected benefits – such as higher productivity, cost savings or improved services – often fail to appear. 

A new EU-funded international research team, made up of experts from Babeș-Bolyai University in Romania, Corvinus University of Budapest, and Aalborg University in Denmark, has taken a major step toward resolving this contradiction. The researchers focused on the world’s biggest car manufacturers – a highly competitive sector where constant development is essential for survival. 

Trendy Doesn’t Always Mean Profitable 

The group analysed the financial impact of digital investments at 54 large, successful car companies over different time spans. Their newly published findings show that digitalisation doesn’t lead to higher profitability – even two years down the line. However, asset efficiency improves almost immediately. A 1% increase in digitalisation can boost the turnover rate of tangible assets by over 0.5%. In short, companies that invest in digitalisation are likely to see real financial returns only in the long run. 

“The data shows that when automotive companies invest in new technologies, executives need to be patient. The return on investment – especially with cutting-edge innovations – generally doesn’t show up until at least two years later. When it comes to digital developments, it’s wise to proceed with caution and keep in mind that financial returns aren’t the only factor. Competitive pressure and partner expectations can also drive such investments,” said Krisztina Demeter, professor at Corvinus University and lead researcher of the study. 

How to Improve Profitability 

The researchers offered two key recommendations to help companies make digitalisation pay off. First, employees must acquire the necessary skills to understand and use the technology effectively – and actually put that knowledge into practice. Second, companies need to give themselves time: financial results only appear once the technologies – and their applications – are fully developed and widely adopted. 

The study also looked specifically at two segments of the automotive industry: car manufacturers and their suppliers. In a surprising twist, suppliers were found to be slightly ahead in adopting digital technologies. This may suggest that suppliers are more agile when it comes to digitalisation, although this gap could narrow as newer technologies become more widespread. 

The database included well-known companies such as Volkswagen, Toyota and Mercedes. Based on their annual reports from 2012 to 2022, the researchers used text mining, keyword-based analysis and machine learning algorithms to calculate digitalisation indexes related to Industry 3.0 and 4.0 technologies – including industrial robots, automation, telecommunications, sensors, cloud computing, artificial intelligence and nanotechnology. Financial indicators such as EBITDA margin, asset turnover and return on equity were taken from audited financial statements. 

The results have been published in the latest issue of the International Journal of Production Economics. The full article is available here: https://doi.org/10.1016/j.ijpe.2025.109699 

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