Building Resilience: Leveraging Advanced Technology in Public Emergencies

Abstract

Public emergencies reduce the total social welfare but may force enterprises to seek innovation. Based on a simple stylized theoretic model, we show that public emergencies incentivize firms to adopt advanced technology. This effect is more significant for firms with lower initial digital endowment. We consider firms’ digital acceleration during the COVID-19 pandemic. We construct a firm-level digital transformation index by textual analysis based on a multisource media news database in China to empirically show that digital transformation can endow firms’ resilience by boosting capital market performance during a public emergency, especially for those medium-sized enterprises due to the costs and need for digital transformation. This research adds to the evidence that public emergencies can leverage advanced technology adoption.

Keywords: Digital transformation, Public emergency, Corporate behavior