Technological Capacity and Firms' Recovery from COVID-19

Abstract

Can higher technological capacity help firms to recover quicker from recessions? Analysing the effects of the Covid-19 pandemic on firm revenues in several countries, we find that firms headquartered in jurisdictions with better digital infrastructure generated relatively higher revenue during the shock period. Improving a country's technological capability by one standard deviation is associated with a relative increase in revenues of the average firm by around 4%. The positive effect of technology is more pronounced among smaller firms, suggesting that it could have helped the recovery of SMEs. © 2021 Elsevier B.V.