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Unintended Consequences of Business Digitalization Among MSMEs During the COVID-19 Pandemic: The Case of Indonesia

Author

Listed:
  • Keita Oikawa

    (Economic Research Institute for ASEAN and East Asia Jakarta, Indonesia)

  • Fusanori Iwasaki

    (Economic Research Institute for ASEAN and East Asia Jakarta, Indonesia)

  • Yasuyuki Sawada

    (University of Tokyo Tokyo, Japan)

  • Shigehiro Shinozaki

    (Asian Development Bank Manila, Philippines)

Abstract

In this study, utilizing sui generis Indonesian data, we investigate whether and how the digitalization of micro-, small-, and medium-sized enterprises (MSMEs) helped them weather the adverse shocks arising from the COVID-19 pandemic and the resulting lockdown. Surprisingly, digitalized MSMEs initially faced negative impacts, but these drawbacks diminished at the later stages. This counterintuitive result underscores the evolving nature of digital transformation among MSMEs, suggesting that digital transformation has yet to be established stably among them. Our findings carry crucial implications for formulating industrial and competition policies related to MSMEs in the COVID-19 recovery process.

Suggested Citation

  • Keita Oikawa & Fusanori Iwasaki & Yasuyuki Sawada & Shigehiro Shinozaki, 2025. "Unintended Consequences of Business Digitalization Among MSMEs During the COVID-19 Pandemic: The Case of Indonesia," Asian Economic Papers, MIT Press, vol. 24(1), pages 98-122, Winter/Sp.
    • Handle: RePEc:tpr:asiaec:v:24:y:2025:i:1:p:98-122
    DOI: 10.1162/asep_a_00927
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