Firm adaptation in COVID-19 times: The case of Portuguese exporting firms

The COVID-19 crisis has severely impacted firms across the world, with some showing greater resilience than others. Engaging in international markets, in particular, increases firms’ exposure to such a global adverse shock, while also providing firms with opportunities for resilience-enhancing responses to the crisis. Operating in a small open economy, Portuguese firms were particularly vulnerable to disruptions in international trade and global value chains. In this paper we investigate how Portuguese exporting firms have adapted their business activities on the back of the COVID-19 crisis, and whether these adaptations depended on their intrinsic characteristics, notably firm size. Furthermore, we analyse the role of government support measures taken in response to the COVID-19 crisis in the adaptation processes of both exporting and domestic firms. We use the recently available Fast and Exceptional Enterprise Survey – COVID-19 (‘Inquérito Rápido e Excecional às Empresas’, COVID-IREE) and complement it with balance sheet data from the Integrated Corporate Accounts System (‘Sistema de Contas Integradas das Empresas’, SCIE), covering a sample of approximately 7,000 Portuguese firms. The results suggest that exporting firms were more likely to adapt their business activities in the face of the COVID-19 crisis. We also found evidence that the adaptation processes of exporting firms tended to be multi-dimensional, operating through different adaptation mechanisms, and contingent upon firm size. The results also suggest that government support measures have enhanced the likelihood of both exporting and domestic firms to adapt, providing evidence of their effectiveness and highlighting the importance of firm-oriented policies that promote economic resilience.