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International firms and COVID-19: evidence from a global survey

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Abstract

This paper explores how the international exposure of companies influenced their strategies in responding to the COVID-19 crisis, and the extent to which they were affected. Our conceptual framework formulates two hypotheses that can be empirically tested. First, we posit that international companies, due to their connections with domestic and foreign markets, are more vulnerable to the crisis, being affected through both demand and supply channels. Second, despite their heightened exposure, we anticipate that international companies will exhibit greater resilience during the crisis compared to their domestic counterparts. This resilience can be attributed to their enhanced global connectivity and productivity. The empirical analysis, based on a large firm-level survey undertaken in 2020 in 133 countries, documents how different types of firms were affected by COVID-19 crisis and how they reacted to the disruptions, providing empirical support for both hypotheses.

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Fig. 1
Fig. 2

Source ITC COVID-19 Business Impact Survey. Data collected from 21 April to 24 August 2020. Note Prediction based on sample enumeration based on regression in Table 4

Fig. 3

Source ITC COVID-19 Business Impact Survey. Data collected from 21 April to 24 August 2020. Note Prediction based on sample enumeration based on regression in Table 5

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Data availability

The data that support the findings of this study should be requested to the International Trade Centre. Restrictions apply to the availability of these data. Data can be made available from the authors if the International Trade Centre provides permission.

Notes

  1. We use the following categorization throughout the paper. Resilient strategy includes any of the following actions: temporarily reduced employment, teleworking, rescheduled bank loans, increased marketing, online sales, launching new or customized products, sourcing from new suppliers, or loaned employees to other enterprises. Retreat includes the following actions: filed for bankruptcy, laid off employees, other, or took no action. Firms adopting multiple coping mechanisms were classified as retreating if they took any retreating action.

  2. Our results, therefore, capture the immediate effects of the COVID-19 on firms and their short-term reactions and cannot make inferences on the longer time horizon. Other papers have attempted on analysing the impact of the COVID-19 on firms over a longer time horizon albeit without distinguishing between international and domestic firms (Khan, 2023; Rocha et al., 2021; Waldkirch, 2021).

  3. Some firms employed multiple coping mechanisms to respond to the crisis. In cases where firms used a combination of retreating and resilient mechanisms, the strategy is coded as “Retreat”.

  4. The regressions presented in the main body of the paper are unweighted. In the Appendix 1, we show that the results are robust to alternative weighting methods and specifications.

  5. Lockdown variable coded as 0 whenever a firm submitted survey responses prior to the start of lockdowns in their country.

  6. Firm size and industry fixed effects are based on large categories. Industry fixed effects encompass three categories: Primary, Manufacturing and Services. Firm size fixed effects include four categories: Micro, Small, Medium-sized and Large. This is due to the available data, as well to the fact that some countries had little or no observations in specific sectors within industries.

  7. Firm size fixed effects, to some extent, control for productivity differences, given the absence of a direct measure of productivity in our data. This data constraint makes it challenging to fully disentangle whether it is the international status of the firm or its productivity that shapes the empirical regularities.

  8. We recognize that shocks may affect domestic and trading firms differently depending on a broad range of firm characteristics, such as firms’ management and operational procedures. A potential avenue for future research lies in obtaining more refined and comprehensive data that to fully discern whether the observed differentials in reactions are predominantly driven by inherent firm characteristics or are indeed a consequence of trade linkages.

  9. We use a linear probability model for ease of interpretation. However, the results are robust to nonlinear specifications and estimates from probit and logit models are shown in the Appendix 1.

  10. These additional regression results tables are available from the authors upon request.

  11. Table 6 in the Appendix 1 shows that results are robust to the use of logistic and probit specification.

  12. As an additional test, we add a control variable capturing the self-reported impact of the pandemic on each firm, represented by a binary variable indicating firms reporting being "strongly affected" by the pandemic. The inclusion of this control to the baseline does not change the results: international firms are more likely to take resilient approaches. The coefficients on international status and being strongly affected have opposite signs. In addition, the coefficient on international status is larger in magnitude than the coefficient on strongly affected (0.1 and − 0.04 respectively). In other words, being an international firm was often enough to overcome the strong effects of the pandemic.

  13. Regression results with different samples and the sample split into two periods are available from the corresponding author.

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Author information

Authors and Affiliations

  1. Division of Market Development, International Trade Centre, Geneva, Switzerland

    Floriana Borino & Valentina Rollo

  2. The Economic Innovation Group, Washington, DC, USA

    Eric Carlson

  3. Division for Africa, Least Developed Countries and Special Programmes, United Nations Conference on Trade and Development, Palais des Nations, 1211, Geneva, Switzerland

    Olga Solleder

Authors
  1. Floriana Borino
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  2. Eric Carlson
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  3. Valentina Rollo
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  4. Olga Solleder
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Correspondence to Floriana Borino.

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At the time of working on this paper Olga Solleder’s affiliation was with the International Trade Centre.

Appendices

Appendix 1. Sensitivity analyses

1.1 Alternative specifications

See Tables 6, 7.

Table 6 Business effects, alternative binary dependent variable models
Full size table
Table 7 Coping strategies, alternative binary dependent variable models
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1.2 Alternative weighting methods

See Tables 8, 9.

Table 8 Business effects, alternative weighting
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Table 9 Coping strategies by international firms, alternative weighting
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Appendix 2. ITC COVID-19 Business Impact Survey

2.1 Survey questionnaire

See Table 10.

Table 10 ITC COVID-19 Business Impact Survey
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2.2 Survey coverage by country

See Table 11.

Table 11 Observations by country
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2.3 Description of variables

See Table 12.

Table 12 Description of variables used in regressions
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Borino, F., Carlson, E., Rollo, V. et al. International firms and COVID-19: evidence from a global survey. Rev World Econ (2024). https://doi.org/10.1007/s10290-024-00525-9

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