Digitalization of companies as a factor of their adaptation to COVID and sanctions shocks

Abstract

Goal: to investigate the relationship between firms’ digitalization and their success in adapting to non-economic shocks in 2020 and 2022. Methodology: econometric analysis of the results of a sample questionnaire survey of 1 800 Russian manufacturing companies conducted in 2022. Findings: significant differences in the factors of successful overcoming of the COVID-19 and sanctions shocks by companies were found. A positive correlation between the digitalization of companies and the dynamics of their revenue and headcount in 2020 was revealed. It is shown that the digitalization of management was a significant factor for companies to better pass the COVID crisis. In addition, the use of digital technologies in production played a positive role in preserving employment in 2020. In 2022, digital technologies did not provide a significant contribution to firm dynamics, although progressive firms that typically use digital technologies adapted better to sanctions pressure. It is also found that the COVID crisis hit the smallest firms the hardest, while the shock of 2022 affected large companies and importing firms more strongly. Under the current sanctions pressure the demand of the state and large and mediumsized Russian business plays a positive role, which may indicate the growing importance of public procurement and import substitution. Originality and contribution of the authors: the study expands empirical knowledge on the role of digital technologies in overcoming noneconomic shocks by companies. Special attention is paid to the digitalization of specific types of business processes.