Digitalization, Remote Work and Firm Resilience: Evidence From the <scp>COVID</scp> ‐19 Shock

ABSTRACT Digital technologies have reduced the importance of physical proximity in completing market transactions, transforming how firms operate and adapt to shocks. This paper assesses the role of remote work, enabled by digitalization, in enhancing firms' resilience during the COVID‐19 pandemic. Using Business Pulse Surveys (BPS) data from 61 countries, we find that firms in sectors more amenable to remote work experienced smaller adverse impacts of the pandemic in countries with better digital infrastructure. These effects are observed for both exporting and non‐exporting firms, with notable differences across sectors. In manufacturing, exporters benefit disproportionately from remote work in countries with better digital infrastructure, reflecting an exporting premium. However, this premium is absent in non‐knowledge‐intensive services that are also less traded internationally. Lastly, the benefits of remote work among firms in countries with better digital infrastructure persisted during the period of recovery from the pandemic, underscoring its importance in mitigating economic losses over time.