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Small and Medium Enterprises Amidst the Pandemic and Reopening: Digital Edge and Transformation

Author

Listed:
  • Lin William Cong

    (Cornell University Johnson Graduate School of Management)

  • Xiaohan Yang

    (Peking University National School of Development)

  • Xiaobo Zhang

    (Peking University Guanghua School of Management
    International Food Policy Research Institute
    Center for Global Development)

Abstract

Using administrative universal firm registration data as well as primary offline and online surveys of small business owners in China, we examine (i) whether the digitization of business operations helps small and medium enterprises (SMEs) better cope with the pandemic shock, and (ii) if the pandemic has induced digital technology adoption. We identify significant economic benefits of digitization in increasing SMEs’ resilience against such a large shock, as seen through mitigated demand decline, sustainable cash flow, ability to quickly reopen, and positive outlook for growth. After the lockdown in January 2020, firm entries have exhibited a V-shaped pattern, with entries of e-commerce firms experiencing a less pronounced initial drop and a quicker rebound. The COVID-19 pandemic has also accelerated digital technology adoption of existing firms in various dimensions (captured by, e.g., the alteration of operation scope to include e-commerce activities, allowing remote work, and adoption of electronic information system), and the effect persists after one year of full reopening.

Suggested Citation

  • Lin William Cong & Xiaohan Yang & Xiaobo Zhang, 2021. "Small and Medium Enterprises Amidst the Pandemic and Reopening: Digital Edge and Transformation," Working Papers 599, Center for Global Development.
    • Handle: RePEc:cgd:wpaper:599
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    Keywords

    SMEs; COVID-19; Digital economy; E-commerce;
    All these keywords.

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