Digital Industrial Policy at the Periphery: Diverging Preferences, Unequal Power

The rhetoric of digital sovereignty, understood as “Europe's ability to act independently in the digital world“, is increasingly gaining ground in EU policy making. Recent years have seen a resurgent spirit of interventionism actively seeking to regulate digital markets, shape supply chains, and promote innovation in strategic areas, as manifested in new instruments such as the Important Projects of Common European Interest. Such policies are negotiated and formulated at the EU level, but it is individual member states that channel, mediate and implement them with various success in the pursuit of national developmental goals. To better understand the variation in such member-state dynamics, this paper focuses on policies at three connected layers of the digital policy stack - semiconductor chips, cloud, and AI in the Eastern Periphery of the EU. Focusing on two country cases: Bulgaria and Czechia, we investigate first, the process of preference formation within these countries and second, to what extent these countries are able to translate their preferences and influence EU policy and regulation. The paper draws on qualitative analysis of key policy documents at the EU and the national level, as well as on elite interviews with policy makers, industry actors, civil society, and experts. Semiconductor, cloud and AI policies have clear redistributive effects within EU member states but also across member states with innovation-targeted policies often deepening regional inequality and wealth disparities. In light of this, (semi-)peripheral countries have adopted different strategies to upgrade their economies and benefit from EU’s new industrial policy.connected layers of the digital stack - semiconductor chips, cloud, and AI in the Eastern Periphery of the EU. Nevertheless, they have had varying success due to a number of factors, including state capacity, political ideology, and coalitional politics in EU negotiations.