Abstract:

Artificial intelligence (AI) offers considerable opportunities for business innovation, yet its diffusion depends on the capabilities and institutional conditions required to support adoption. Research on organizational readiness and complementary investments suggests that access to AI technologies alone is insufficient, while existing empirical evidence highlights substantial differences in uptake across firms and economic environments. This study examines the country-level factors associated with AI adoption in European enterprises and investigates how these relationships vary across enterprise size classes.

Drawing on the technology-organization-environment (TOE) framework, the analysis combines harmonized Eurostat indicators with institutional measures from the Heritage Foundation’s Index of Economic Freedom for 28 European countries (the 27 EU Member States and Norway) in 2021 and 2023. The dependent variable measures the proportion of enterprises with at least ten employed persons using at least one AI technology. Regression specifications incorporating year effects examine e-commerce participation, business R&D expenditure, business density, trade openness, and four institutional dimensions: rule of law, government size, regulatory efficiency, and open markets. Additional estimations distinguish small, medium-sized, and large enterprises and assess adoption breadth using alternative thresholds for the number of AI technologies used.