Between Regulation and Global Influence: Can the EU Compete in the Digital Economy?
The European Union (EU) has positioned itself as a global leader in digital regulation, with landmark frameworks such…www.mdpi.com
by Fernando Pacheco 1,*ORCID andMaria João Velez 2
1
CIES — Centre for Research and Studies in Sociology, ISCTE — University Institute of Lisbon, 1649–026 Lisbon, Portugal
2
BRU-ISCTE — Business Research Unit, Department of Human Resources and Organizational Behavior, ISCTE Business School (IBS), 1649–026 Lisbon, Portugal
*
Author to whom correspondence should be addressed.
Reg. Sci. Environ. Econ. 2025, 2(4), 30; https://doi.org/10.3390/rsee2040030
Submission received: 16 August 2025 / Revised: 13 September 2025 / Accepted: 24 September 2025 / Published: 1 October 2025
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Abstract
The European Union (EU) has positioned itself as a global leader in digital regulation, with landmark frameworks such as the Digital Services Act (DSA), the Digital Markets Act (DMA), and relevant AI Act. These initiatives reflect the EU’s ambition to balance technological innovation with consumer protection, market fairness, and digital sovereignty. Yet, a growing body of research suggests that the EU may be lagging its global competitors — namely the United States and China — when it comes to scaling high-growth digital enterprises and attracting investment in frontier technologies. This study investigates the paradox of regulation versus innovation in the EU by comparing key performance indicators such as R&D investment, venture capital availability, and digital innovation output with those of the U.S. and China. Drawing on datasets from WIPO, the OECD, IMF, and the World Bank, the paper incorporates both cross-sectional and longitudinal analysis to assess the EU’s digital trajectory. Findings suggest that while the EU excels in institutional frameworks and research output, structural barriers — such as regulatory fragmentation and underdeveloped capital markets — limit its global competitiveness. The article concludes by discussing policy implications and the need for adaptive governance to maintain Europe’s digital leadership.
Keywords: European Union; digital economy; innovation policy; regulation; competitiveness; venture capital; market fragmentation