Digitization is an influential megatrend that is quickly and comprehensively transforming economic spaces worldwide. Its disruptive power has not yet been fully developed but, despite a lack of topical empirical or theoretical research, it nevertheless seems clear that it will significantly affect the economic order within and between economic spaces and places. Currently, digitization is high on the policy agenda in many countries. Several related programs and initiatives combine expansion and improvement of digital infrastructure with efforts to reduce spatial economic inequality and to facilitate a general catch‐up process for lagging (often rural) regions. However, the idea that digitization can reduce spatial inequality remains highly controversial. This study aims to focus on the economic geography implications of digitization and to enrich the existing literature in two ways. First, the study overviews the state of research on the spatial consequences of digitization. Deploying a comprehensive literature review, this section discusses the primary theoretical and empirical results from two contradictory narratives on the ability of digitization to reinforce the death of distance and thus reduce spatial inequality. Second, we develop a research agenda concerning select fields of research that could appropriately be addressed in the future by economic geographers. These fields include spatial economic digitization effects, digital competencies, entrepreneurial activities, and innovation activities in both urban and rural regions. Closing the research gaps would contribute to the development of much‐needed policy measures.

Following the “death of distance” postulate, digitalization may reduce or even eliminate the penalty of firms being located in rural areas compared with those in urban agglomerations. Despite many recent attempts to measure digitalization effects across space, there remains a lack of empirical evidence regarding the adoption of digital technologies from an explicit spatial perspective. Using web-scraping data for a sample of 345,000 small firms in Germany, we analyze the determinants of website prevalence. Comparing urban with rural areas, we show that running a website—as a proxy for the degree of digitalization of the respective firm—is highly dependent on location, whereby firms in urban areas are almost twice as likely to run websites compared with those located in rural areas. Our county-level analysis shows that a high population density, a young population and a high educational level have a positive and significant association with the probability that firms run websites. Surprisingly, we find a negative and significant association of gross domestic product per capita with website prevalence, which is driven by urban regions. There are no differences between urban, semi-urban and rural areas in terms of website up-to-dateness as well as social media prevalence. We conclude that there is a substantial digital divide and discuss policy implications.