Assessing Capabilities to Embrace Digital Transformation: The Case of Southern Italy

Southern Italy has been confronting dire economic and resource scarcity challenges to keep up with the national growth. Digitalization is a changing phenomenon that transforms the firm’s structure and enhances production, operational, and service efficiency helping to reduce economic and geographical disparity. Firms play a crucial role in the development of an economy. In the recent decade, digital transformation has emerged as a driver for economic growth and urban development by transitioning the firms’ processes. However, firms need sufficient institutional support during the digital transition process. The Italian government has taken substantial initiatives to stabilize and boost the economic structure of southern Italy. This study aims to determine the existing relationship between southern Italian cities’ digitalization and firms’ financial capabilities and institutional support. We have applied correlation and regression models to examine the relationship between cities’ digitalization, local firms’ financial capabilities, and institutional support. Our results highlight the significant relationship between cities’ digitalization, firms’ financial capabilities, and institutional support in southern Italian cities. This paper produces policy suggestions for the government to extend the institutional financial support toward the southern firms. As the transformation of cities will increase the operational and production efficiency of the firms, which will add to the regional and national economic development.