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TechInnovation/Digital Transformation – What constrained firm investments in digital technologies during the pandemic? (Brookings)

Leonardo IacovoneNatasha KapilLukasz Marek MarcGiovanna MarcolongoIlias Skamnelos, and Gallina A. Vincelette write: While firms during COVID-19 accelerated the adoption of digital technologies, this adoption can operate through different pathways: expansion of digital platforms or investments in new digital technologies. In this blog, we analyze if there are specific barriers limiting some of these pathways, and specifically what barriers may have limited businesses investments in new in digital technologies in response to the pandemic. Did they lack awareness about the potential benefits of digitization? Did they lack complementary managerial capabilities to exploit digital technologies? Were they restricted in their access to finance? Did the uncertainty of future scenarios increase their perception of risk? Specifically, we explore how access to finance is important for investments in digitization by small and medium firms and how heavy debt can lower investments in the presence of high uncertainty. When the outlook becomes uncertain, government support is essential to smooth concerns about the future of business, sustain demand, and reduce volatility. Such interventions can be key to sustain a productivity-driven recovery built on the effective adoption of digital technologies.

go to Brookings: What constrained firm investments in digital technologies during the pandemic? (brookings.edu)