Digital Twin Readiness and Green Entrepreneurship: Evidence from the Baltic States

Abstract

This study examines whether the digital twin readiness of the Baltic countries is systematically related to green entrepreneurship. Using unified country–industry–year panel data for Estonia, Latvia and Lithuania from 2015 to 2024, we construct a digital twin readiness index (DTRI) based on five enterprise-level digital capability indicators: artificial intelligence, the Internet of Things, cloud computing, big data analytics and ICT experts. DTRI is interpreted as a readiness indicator, rather than direct evidence of enterprise-level adoption. Green entrepreneurial outcomes are measured by clean technology start-up formation, green venture capital mobilisation and environment-related patent applications. The empirical strategy combines two-way fixed-effects models, staggered difference-in-differences estimates and an instrumental-variable specification based on a Bartik-style semiconductor price shock interacted with historical ICT intensity. Results show that higher DTRI is more consistently associated with venture-capital mobilisation and green patenting than with start-up formation. The strongest associations appear in Lithuania's energy-related activities and Estonia's manufacturing sector. The study contributes by shifting digital twin analysis from firm-level deployment to meso-level readiness, distinguishing entry, financing and innovation margins of green entrepreneurship and adding evidence from small open post-transition economies to twin transition debates.