Europe has set out an ambitious and forward-looking vision for Artificial Intelligence, positioning it as a crucial driver for productivity, competitiveness and resilience across the European Union. At the Artificial Intelligence (AI) Action Summit in Paris in February 2025, Commission President Ursula von der Leyen launched InvestAI to mobilise €200 billion for investment in AI, including a new European fund of €20 billion for AI gigafactories.
The modular design of modern AI solutions allows even resource-constrained small businesses to access these technologies through external services and platforms. Our research significantly advances understanding of digital transformation in SMEs. Although the benefits of AI for business are often highlighted, robust empirical evidence—especially for smaller firms—has been limited. This study helps bridge that gap, offering clear, data-driven proof that adopting digital technologies yields tangible financial advantages for small and medium-sized enterprises.
For many businesses, including SMEs, AI is seen as a silver bullet — a technology that can be “adopted” and expected to deliver growth, efficiency and scale almost by default. This narrative is appealing, particularly at a time when Western economies are grappling with sluggish productivity growth, rising costs and intensifying global competition. But it risks oversimplifying the true picture.
For many businesses, including SMEs, AI is seen as a silver bullet — a technology that can be “adopted” and expected to deliver growth, efficiency and scale almost by default. This narrative is appealing, particularly at a time when Western economies are grappling with sluggish productivity growth, rising costs and intensifying global competition. But it risks oversimplifying the true picture.
New empirical evidence from across Europe now reinforces this point. In research I led with an international team of scholars, we analysed data from more than 11,000 small and medium-sized enterprises across Europe, drawing on data from the European Commission’s Flash Eurobarometer survey, one of the most comprehensive datasets available on digital adoption among European businesses. Using advanced econometric methods, we examined firms across all sectors in European countries, isolating the specific impact of AI on business outcomes while controlling for a range of other factors.
The study found that SMEs adopting AI are 15 per cent more likely to achieve revenue growth of over 30 per cent, while their risk of revenue decline decreases by more than 12 per cent. However, we also discovered that these benefits are most enhanced when AI is combined with complementary technologies such as the Internet of Things and Big Data Analytics, with joint adoption increasing growth potential by a further 21 per cent. This highlights the importance of integration rather than isolated technology uptake in Europe’s SME digital transition.
Our results show that AI is not the preserve of large corporations. SMEs can use AI to overcome traditional constraints on resources and expertise, building competitive advantages through automation, better decision-making and deeper customer insight, while scaling more efficiently and responding faster to changing market demands.
Our research also shows that AI supports SMEs in practical, day-to-day ways, by automating internal processes to boost efficiency, increasing employee productivity while minimising errors, enabling businesses to adapt more swiftly to changing conditions, and enhancing their ability to anticipate customer needs and market shifts. When combined with the Internet of Things and Big Data Analytics, these benefits multiply. Connected devices generate real-time data, analytics systems interpret it, and AI converts insights into smarter decisions and more accurate predictions.
A challenge for policymakers and business leaders
As our results indicate, while AI adoption can greatly enhance revenue growth, the strongest outcomes are achieved when it is combined with Internet of Things technologies and advanced data analytics. In other words, AI performs best as part of an ecosystem rather than as a standalone solution.
For European policymakers and business leaders alike, the implication is clear. If the EU is serious about closing its productivity gap, particularly among SMEs, the focus must shift from simply encouraging AI adoption to enabling integration, capability-building, and digital coherence across the SME landscape.
Targeted support for the adoption of AI, IoT, and BDA in SMEs—through education programmes and funding schemes—could play a key role in stimulating significant economic growth, especially in regions with lower digital maturity. One of the main challenges is integrating these technologies while managing the environmental impact of widespread AI adoption, which is already causing a surge in energy consumption.
So, AI’s promise for Europe’s SMEs does not lie in adoption alone, but in integration. Our findings show that when AI is combined with Big Data and the Internet of Things, it becomes a genuine driver of productivity and growth. This underscores the importance of moving beyond technology checklists towards enabling coherent digital systems, skills and infrastructure. If Europe wants its AI ambitions to translate into real economic gains, particularly among its smallest firms, it is paramount that AI should not be deployed in isolation, but instead woven into the fabric of a connected and coherent digital ecosystem.
The study was published in the following journal: Ardito, L., Filieri, R., Raguseo, E., & Vitari, C. (2025). “Artificial intelligence adoption and revenue growth in European SMEs: synergies with IoT and big data analytics.” Internet Research, Vol. 35 No. 4, pp. 1508-1534. https://www.emerald.com/intr/article/35/4/1508/1251330/Artificial-intelligence-adoption-and-revenue
