Working Paper: NBER ID: w29644
Authors: Diego A. Comin; Marcio Cruz; Xavier Cirera; Kyung Min Lee; Jesica Torres
Abstract: This paper estimates the impact of technology sophistication pre-COVID-19 on the performance of firms during the early stages of the pandemic. We exploit a unique data covering firms from Brazil, Senegal, and Vietnam using a treatment effect mediation framework to decompose the results into a direct and an indirect effect. Increasing pre-pandemic technology sophistication by one standard deviation is associated with 3.8pp higher sales. Both effects are positive, but the direct effect is about 5 times larger than the indirect effect. The total effect on sales is markedly nonlinear with significantly smaller estimates of the reduction in sales for firms with more sophisticated pre-pandemic technology. Our results are robust to different measures of digital responses and matching estimators.
Keywords: Technology Sophistication; Firm Performance; COVID-19; Digital Technologies; Resilience
JEL Codes: I15; O12; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| prepandemic technology sophistication (O30) | firm performance (L25) |
| prepandemic technology sophistication (O30) | digital technology adoption (O33) |
| digital technology adoption (O33) | firm performance (L25) |
| prepandemic technology sophistication (O30) | firm resilience (G33) |
| digital technology adoption (O33) | firm resilience (G33) |