Business Investment in the Era of Digital Transformation

Why It Matters

Digital investment is the primary engine of growth in a stagnant investment environment, shaping future productivity and competitiveness across advanced economies.

Key Takeaways

• OECD digital investment up 130% since 2007
• US digital investment 3‑4× 2007 levels, drives growth gap
• Non‑digital assets barely grew post‑GFC
• Digital capital divergence threatens productivity convergence
• Policy levers: finance, skills, market integration

Pulse Analysis

The rise of digital investment has become the bright spot in an otherwise sluggish OECD business‑investment landscape. Detailed asset‑type data reveal that while traditional machinery and structures have stagnated, spending on ICT hardware, software and data assets more than doubled or even tripled over the past two decades. This trend persisted through the Global Financial Crisis and the Covid‑19 shock, underscoring the resilience of digital spending as firms chase cloud services, AI‑enabled applications and data‑driven business models. The United States stands out, with digital outlays expanding at a pace that dwarfs its European peers, effectively pulling the overall investment growth gap between the US and the rest of the OECD.

The concentration of digital investment in the US is not limited to the tech sector; a substantial share originates from non‑ICT firms that have integrated software and data solutions into core operations. This economy‑wide diffusion has built a sizable digital capital stock, which, unlike traditional capital, depreciates rapidly and therefore requires continuous reinvestment. Countries with modest initial digital capital—such as Germany or Canada—are falling further behind, creating a divergence that could translate into persistent productivity differentials. As AI, cloud computing and data analytics become central to value creation, the digital‑capital gap may become a decisive factor in long‑term growth trajectories and living‑standard convergence.

Policymakers face a clear mandate: remove barriers that impede digital investment and nurture the complementary intangibles that unlock its productivity potential. Enhancing equity financing and venture‑capital ecosystems can address the collateral constraints of intangible assets, while upskilling programs and flexible labour regulations ensure firms can adopt new technologies without prohibitive costs. Finally, reducing market fragmentation—particularly within the EU—can unlock scale economies that make large‑scale digital projects viable. By aligning finance, skills and competition policy, governments can help narrow the digital‑capital divide and sustain the productivity boost that digital investment promises.