Globally Engaged Firms in the COVID-19 Crisis

This paper analyzes the initial impact and recovery of globally engaged firms from theCOVID-19 crisis. It uses rich survey data of nearly 65,000 firm-year observations in 45 countries spanning three wavesof data collection. The findings are organized in a series of stylized facts, which suggest that although the pandemichad an immediate adverse impact on most firms, the globally engaged ones are recovering faster, possibly due to theirhigher capabilities. Among globally engaged firms, those directly involved with international markets show betterrecovery than the ones that were indirectly involved. These results mask wide variation by firm traits, sectoralattributes, and country characteristics. At the core of the recovery of globally engaged firms is their heightenedresponse to the crisis by finding novel ways to adapt supply chains even in the presence of lockdowns and uncertainty.These firms swiftly digitalized, introduced new products and changed their markets and sources of inputs. Over and abovetheir capabilities, global engagement cushions firms against shocks. Policymakers could therefore facilitate globallinkages by providing information on potential markets and products, by making production flexible in terms offacilitating remote work, reducing the rigidity of contracts; and incentivizing financial institutions to issueinstruments that reduce uncertainty risk.