Firm Digital Adoption During COVID-19

Is COVID-19 exacerbating the digital divide? Anecdotally, the pandemic forced many firms to adopt new technologies, as consumers shifted online and bricks-and-mortar retail was disrupted. The paper presented in this ZEW Research Seminar examines the extent to which COVID led to firm adoption of digital technologies across 24 advanced and emerging economies. The analysis combines novel data on the high-frequency diffusion of website technologies, with firm data on their pre-COVID characteristics. The econometric impact of COVID is identified using weekly differences in the timing of COVID across countries. The authors find that COVID led to a rapid diffusion of many technologies: e-commerce, online payments, general analytics and A/B testing. For e-commerce, a more basic technology, they find similar trends across country income levels, but adoption of (sophisticated) A/B testing is much more pronounced in advanced economies. Similarly, across firms, they find smaller firms are more likely to adopt e-commerce during COVID, whereas large, productive firms with advanced software and cloud in place pre-pandemic, were far more likely to adopt A/B testing. While COVID has led to broad adoption of more basic technologies, the rapid diffusion of sophisticated technologies seems to be more confined to a minority of advanced firms and countries.