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What constrained firm investments in digital technologies during the pandemic?

What constrained firm investments in digital technologies during the pandemic? | Speevr

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.

In our previous blog we showed that during the pandemic firms turned to digital, but this expansion of digital technology can be done through alternative pathways. Firms can either expand the use of information communication technologies (ICT) that they already own and expand the use of platforms or invest in new technologies. These two alternatives differ in their potential impact on productivity but also in terms of fixed costs and financing needs. New investments require firms to incur significant fixed costs, while expanding the use of pre-owned technology or the use of digital platforms does require limited investments. In the three European countries analyzed (Romania, Poland, and Bulgaria) we find find that investment in new digital technologies is much less common than expansion in the use of digital platforms, and this pattern is driven by the choices of smaller businesses. In fact, while smaller firms are able to expand the use of pre-owned digital technologies and digital platforms just as larger firms do (left panel, Figure 1), they are three times less likely to invest in new digital technologies (right panel, Figure 1). Why is that?
Figure 1. Expansion of usage of existing digital technology vs. new investments by firms’ size

COVID-19 affected firms’ access to external financing, but it also hit their cash flows. The drops in sales hurt firms’ liquidity and constrained the availability of internal resources to finance the reboot and invest in digital (right panel in Figure 2). But firms adapted and exploited alternative coping strategies. For example, the more sales were affected the more firms redirected their production toward new products (product innovation—left panel in Figure 2).
Figure 2. Product innovation vs. investment in digital technologies

The unprecedented circumstances brought on by COVID-19 raised uncertainty to historically unseen levels. Overall, firms that experienced higher uncertainty were less willing to invest in digital technologies compared to firms whose future revenues appeared more secure (left panel, Figure 3). However, uncertainty lowered the willingness to invest in digital and was particularly strong among financially distressed firms falling into arrears (right panel, Figure 3), suggesting that a mix between financial constraints and uncertainty may be a key reason for limiting investments in new digital technologies.
Figure 3. Investment in digital technologies, uncertainty in sales, and fear of falling into arrears

Public support played a key role in influencing firms’ responses to the pandemic and, in particular, their choice to invest in digital technologies. The help firms received from the state counteracted the negative effects of uncertainty on investment. Firms that received assistance not only invested more often in general, but they did so even when future outcomes were more uncertain. This result is cause for some optimism as it suggests that governments can play a crucial role in smoothing the risks that firms bear and in supporting their recovery by, for example, enhancing their likelihood to invest in digital technologies. We will discuss how public support for firms was rolled out and how it helped firms in our future blogs.

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The impact of COVID-19 on industries without smokestacks in South Africa

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Abstract
The COVID-19 pandemic has hit several sectors of economies, including those in Africa particularly hard. The affected sectors include industries without smokestacks (IWOSS). The purpose of this brief is to conduct an early assessment of the effect of the pandemic on the economy, and specifically, the IWOSS sectors considered in the country case study, both in terms of the pandemic’s current impact, as well as to present a view on the long-term sectoral impact.
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The impact of COVID-19 on industries without smokestacks in Senegal

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In Senegal, the COVID-19 pandemic has caused significant health and economic damage. More specifically, the country’s promising industries without smokestacks (IWOSS) have adversely been impacted, with a dramatic reduction in turnover, investment, and jobs. In addition, the pandemic has significantly reduced fiscal space by both shrinking the government tax base and reducing sovereign debt solvency, and, hence, its international credit ratings. All of these repercussions have contributed to lowering the state’s capacity to undertake investments and implement reforms to boost the IWOSS sectors, and might further result in delaying needed actions to unleash IWOSS potential in Senegal. This brief updates the spring 2021 working paper (Mbaye et al., 2021) on how support to IWOSS in Senegal can create jobs, taking into account the far-reaching effects of the pandemic.
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MYANMAR: Further down the rabbit hole

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Education in emergency in Nigeria: Creating gender equitable policies so all girls have an uninterrupted right to learn

Education in emergency in Nigeria: Creating gender equitable policies so all girls have an uninterrupted right to learn | Speevr

Even under what some may describe as normal conditions, girls in Nigeria face a distinctive set of barriers to formal education at all levels. Nearly 2 out of 3 (about 6.34 million) of the country’s 10.19 million out-of-school children in the country are girls. Prior to the outbreak of COVID-19, violence, child, early, and forced marriages (CEFM), lack of schools, inadequate infrastructure, unsafe environments, limitations in teacher training, and systemic gender biases impeded girls’ participation and learning in formal schooling across Nigeria.

With the outbreak of the pandemic and the subsequent closure of schools, the country has not only suffered direct losses from its impact, but also an ever-worsening spate of insecurity and violence across the country, including attacks on school children—especially girls. For instance, at the start of 2020, 935 schools in Northeast Nigeria were closed as a result of attacks and conflict. Indeed, schools are among the worst institutional casualties of complex disasters, as is evident from the COVID-19 pandemic, the Boko Haram insurgency, and several attacks on communities in Nigeria, which have all compounded the problems many girls face in consistently accessing schooling. This calls for improved responses for education during emergencies in Nigeria.
Schools are among the worst institutional casualties of complex disasters, as is evident from the COVID-19 pandemic, the Boko Haram insurgency, and several attacks on communities in Nigeria, which have all compounded the problems many girls face in consistently accessing schooling.
In response to the forced closure of schools, the Oyo state government launched an “education-in-emergency” intervention called “School on Air” to serve as an alternative way of learning for students during the school closures. Students were expected to participate in remote classes by watching recorded subject lessons on the TV or listening to radio broadcasts. However, initial reports have found gender disparities in student participation in remote learning interventions during COVID-19, with household duties preventing girls from having sufficient learning time. Equally important are concerns about how factors such as loss of jobs and family income during COVID-19, teenage pregnancies, child labor, and CEFM might prevent girls from returning to complete their education even after the reopening of schools.
How can policy and practices be designed to ensure that girls and young women are not left behind in times of emergency? This is the question I will take up in my research as an Echidna Global Scholar at Brookings.
Ensuring all Nigerian girls exercise their right to learn, continuously
Having lost my father at age 13, I experienced firsthand how the loss of a family’s primary means of economic support could potentially threaten a girl’s education or lead to an early or forced marriage. I was fortunate that my mother—a formally educated woman herself—was committed to ensuring that my three siblings and I completed our primary-, secondary-, and even university-level education.
Now, having gained formal education and its privileges, I am committed to ensuring that girls across Nigeria are equally able to exercise their same right to learn. No girl’s right or desire for formal education should ever be denied for any reason. For over 15 years, I have worked to advance children’s and especially girls’ education rights, as well as improve public schooling standards. To break cycles of educational and social exclusion for girls—and their children—MAYEIN, an organization I founded in 2012, has campaigned for girls’ education in communities across southwest Nigeria and has established “Girls without Borders,” a network of school-based clubs designed to teach girls their basic rights and provide them with leadership training.
Through my research as an Echidna Global Scholar, I hope to expand my impact and assist both Nigeria’s federal and the Oyo state governments, respectively, in formulating policy solutions for education during emergencies that are gender equitable and just—ensuring that no girl goes without an education, even in times of emergency.                

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