Does COVID-19 pandemic spur digital business transformation? Evidence from selected MENA countries

Abstract

PurposeIn the light of high reliance on digital technology to mitigate the consequences of the coronavirus disease 2019 (COVID-19) pandemic and its containment measures, this study investigates the factors influencing firms' decision to adopt digital technologies during COVID-19 in four Middle East and Northern African (MENA) countries, namely, Egypt, Jordan, Morocco and Tunisia.Design/methodology/approachThe study used the International Labour Organization (ILO)/Economic Research Forum (ERF) COVID-19 - MENA Monitor Enterprise Survey (CMMENT), comprising 5,480 firms, surveyed during 2020–2021. The empirical model is estimated using the linear probability model (LPM) to address the problem of unobserved heterogeneity between firms, countries, and time.FindingsThe results revealed that firm characteristics, such as firm size and foreign ownership, encourage digital transformation in the business sector. Moreover, firms that face challenges during the pandemic, comply with the containment measures, and receive government assistance are more likely to adopt digital solutions. Furthermore, the results indicated that firms operating in services sector have a higher likelihood to adopt digital technology. Disaggregating the total sample into several sub-samples, the results are robust across countries and technology types, supporting the initial hypothesis that COVID-19 encourages digital transformation in the MENA region.Originality/valueThe study has numerous contributions. First, to the best of the authors' knowledge, this is the sole study that uses micro data collected during the COVID-19 to examine the factors influencing firms' decision to adopt and invest in digital solutions in the MENA countries. Second, the paper employs the LPM estimator to address the issue of unobserved heterogeneity between firms, countries and time. Finally, the paper offers some practical recommendations for accelerating digital transformation in MENA region.

Drivers of firms’ digital activities in response to the Covid-19 pandemic

“…Being already endowed with a significant technological infrastructure, such as the one relative to a website, is a relevant driver for a firm to adopt suitable technologies to continue its presence on markets. From a descriptive point of view, Ali and Ebaidalla (2022) reveal that firm size and foreign ownership foster digital transformation, highlighting a strong correlation between the Covid-19 outbreak and digitalization and suggesting that service firms are more likely to embrace digital technologies.…”

“…Cirera et al (2021) evidence the issue of mismatch and mistarget of support policies, that were particularly limited in developing countries and for more vulnerable as well as small firms. Besides Ali and Ebaidalla (2022), who find that firms receiving government support are more likely to adopt digital solutions, Janzen and Radulescu (2022) analyse the role of government support in Eastern European Countries pointing to a distinction between small and large firms, evidencing a mild effect for the latter but a much higher relevance for the former. 11 Less evidence has been devoted to understand whether this kind of support may foster also a digitalization process: thus, we account for this determinant which depends on the institutional context in which it is embedded.…”