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FIRM AGILITY AND DIGITALISATION LESS HELPFUL THAN EXPECTED DURING THE COVID-19 PANDEMIC, BUT VALUABLE IN THE LONGER RUN


Business Administration and Management

FIRM AGILITY AND DIGITALISATION LESS HELPFUL THAN EXPECTED DURING THE COVID-19 PANDEMIC, BUT VALUABLE IN THE LONGER RUN

Name and surname of author:

Tjaša Redek, Tomaž Čater, Barbara Čater, Matej Černe, Matjaž Koman

Year:
2022
Volume:
25
Issue:
3
Keywords:
COVID-19, firm performance, crisis readiness, digitalisation, firm-level evidence
DOI (& full text):
Anotation:
Firms’ performance during exogenous crises depends on several factors, from strategic foresight, financial readiness, and a number of firm-specific as well as sectoral aspects, also including luck…more
Firms’ performance during exogenous crises depends on several factors, from strategic foresight, financial readiness, and a number of firm-specific as well as sectoral aspects, also including luck and government support. The aim of this paper is to investigate the extent to which the ‘crisis readiness’ of firms, defined by factors like a proactive strategic approach, digitalisation, and financial constraints, as well as the reliance on or availability of government support, is responsible for the outcome during the COVID-19 crisis compared to the long-run contribution made by these factors. The empirical investigation uses a unique combination of firm-level balance sheet data and unique survey data concerning the strategic focus and implementation of Industry 4.0. While the literature suggests that digitalisation, a strategic proactive approach, and crisis readiness (itself depending on several factors) impacted the firms significantly during the COVID-19 crisis, the results show firm performance primarily depended on other (sectoral) aspects serving as a major exogenous factor impacting their performance. During the crisis, digitalisation was additionally mentioned as an important adjustment factor. However, using firm-level data we show that while companies were able to mitigate certain impacts of the supply and demand shocks triggered by COVID-19 using their internal resources and characteristics, including strategic elements, the biggest explanatory factor remains the sector involved. This leads to important managerial and policy recommendations, principally stressing the importance of proactivity and agility for firms’ long-run performance, whereas in the short run the state must help mitigate the effects.
Section:
Business Administration and Management

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