BIS study reveals digitalization boosted firm performance during pandemic
A new working paper from the Bank for International Settlements finds that firms with pre-pandemic digitalization investments significantly outperformed non-digitalized firms in Türkiye during the COVID-19 pandemic. Digitalized firms saw higher assets, sales, employment, and profitability.
Digitalization's tangible gains
The study, using data from Türkiye, developed a novel firm-level digitalization index based on firm-to-firm trade data.
It compared firms that adopted digital technologies before the pandemic with those that did not, employing a coarsened exact matching and difference-in-differences approach.
The findings show that digitalized firms significantly outperformed their non-digitalized counterparts across key metrics.
Specifically, digitalized firms recorded real assets, real sales, and employment that were 3 percent, 5 percent, and 2 percent higher, respectively.
The impact was even more pronounced in profitability, return on assets, and export share, showing increases ranging from 0.13 to 0.50 percentage points.
Expanded networks, reduced churn
The research identifies several key channels explaining the enhanced performance of digitalized firms.
These firms expanded their trade networks, adding more partners and operating over greater distances.
Digitalization boosted the number of trading partners by 5 percent and increased the average distance to trade partners by 2 percent more than for less digitalized firms.
Furthermore, digitalized firms reduced labor churn rates and improved both productivity and overall competitiveness.
These channels collectively allowed digitalized businesses to mitigate the adverse effects of the crisis and capitalize on new opportunities.
Digital resilience in crisis
This study provides compelling evidence for the strategic value of pre-crisis digitalization, particularly for emerging economies.
While focused on Türkiye, its findings on enhanced resilience and market reach are broadly applicable to firms navigating global disruptions.
Policymakers should consider these insights when designing incentives for digital transformation, especially in vulnerable sectors.