| Summary: | The study identifies the main factors that affect the diffusion of digital technologies and their returns among Italian firms, highlighting the crucial role of public policies. It uses a unique data infrastructure that integrates information on digital technology adoption, firm performance, and workers' and managers' skills. The analysis shows that the low digitalisation of Italian firms, especially of SMEs, can be traced back to the low levels of three factors: i) workers' skills, ii) management capabilities, and iii) accumulation of intangible assets. These factors are also crucial to maximise the effectiveness of public policies supporting firm digitalisation, such as the deployment of broadband infrastructure and fiscal incentives to investments in digital technologies. Finally, the analysis shows that the COVID-19 crisis contributed to further widening the digital gap between Italian firms, favouring ex-ante more digitalised companies, suggesting that public policies play a crucial role for the post-COVID-19 recovery
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