Path Dependence and Spatial Spillovers in Regional Digitalization: Evidence from Dynamic Spatial Panel Analysis in Europe

Digitalization is the driver of regional competitiveness and sustainable development, but its geographical impacts differ significantly across Europe. This study was conducted to determine if digital transformation results in regional sustainability or if it increases spatial inequalities, concentrating on European NUTS-1 regions for the period 2021–2025. A composite Regional Digitalization Index was developed by means of Principal Component Analysis (PCA) based on indicators measuring internet access, internet usage, and the availability of digital public services. Dynamic spatial panel econometric models were used for empirical investigation, including a Spatial Autoregressive (SAR) model and a Spatial Durbin model (SDM), which facilitated the exploration of both temporal dependence and spatial spillover. Three main conclusions can be derived from the results, as follows: The level of digitalization in a region is highly stable over time, whereby the development depends most on previous paths. Subsequently, human capital is highly significant for digital development, and its effects are not only local but also spill over to neighboring regions. Lastly, spatial interactions consist of two opposite forces—the positive diffusion from digitally advanced neighboring regions and the competitive effects related to the economic strength of neighboring regions—that further intensify the core–periphery divide.