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Firms’ Digitalization during the COVID-19 Pandemic : A Tale of Two Stories

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  • Avalos Almanza,Edgar Itamar
  • Cirera,Xavier
  • Vargas Da Cruz,Marcio Jose
  • Iacovone,Leonardo
  • Medvedev,Denis
  • Nayyar,Gaurav
  • Reyes Ortega,Santiago

Abstract

The COVID-19 pandemic accelerated the digital transformation of businesses. Using a unique globalpanel dataset, this paper documents the patterns of digital adoption during the pandemic across firms in 57 (mostlydeveloping) countries. The data show the tale of two stories. On one hand, the pandemic drove firms to increasethe use of digital platforms and invest in digital solutions. On the other hand, there is evidence that thedigital divide increased. There remain substantial gaps between small and large firms as well as across sectors,particularly for new investments in digital solutions. Firms that did not use any digital platform or channel before thepandemic, also lagged in their response to the pandemic, increasing the gap with those that were more digitallyready. Moreover, although the share of online sales across firms for all size groups increased, there is a growingconcentration of online sales among top firms. The paper discusses some of the factors associated with this increasein the digital divide and find that changes in digitalization remain even after mobility restrictions haveeased. The analysis suggests that the pandemic has accelerated digitalization, but some firmsdisproportionately benefited from the digital transformation, potentially increasing the digital divide.

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  • Avalos Almanza,Edgar Itamar & Cirera,Xavier & Vargas Da Cruz,Marcio Jose & Iacovone,Leonardo & Medvedev,Denis & Nayyar,Gaurav & Reyes Ortega,Santiago, 2023. "Firms’ Digitalization during the COVID-19 Pandemic : A Tale of Two Stories," Policy Research Working Paper Series 10284, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10284
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    References listed on IDEAS

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    1. Amin,Mohammad & Viganola,Domenico, 2021. "Does Better Access to Finance Help Firms Deal with the COVID-19 Pandemic ? Evidence from Firm-Level Survey Data," Policy Research Working Paper Series 9697, The World Bank.
    2. Dingel, Jonathan I. & Neiman, Brent, 2020. "How many jobs can be done at home?," Journal of Public Economics, Elsevier, vol. 189(C).
    3. Arthur Grimes & Cleo Ren & Philip Stevens, 2012. "The need for speed: impacts of internet connectivity on firm productivity," Journal of Productivity Analysis, Springer, vol. 37(2), pages 187-201, April.
    4. M.F. Warren, 2002. "Adoption of ICT in agricultural management in the United Kingdom: the intra-rural digital divide," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 48(1), pages 1-8.
    5. World Bank, 2022. "Digitalizing SMEs to Boost Competitiveness," World Bank Publications - Reports 38108, The World Bank Group.
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