Digital Adaptation and Crisis-Related Innovation During the COVID-19 Pandemic: Evidence from Selected MENA Economies

Abstract

This study examines whether firms’ digital adaptation practices were associated with crisis-related innovation during the COVID-19 pandemic. Using firm-level data from the World Bank Enterprise Survey COVID-19 module for Jordan, Lebanon, Morocco, and Malta, the paper analyzes three crisis-driven digital adaptation practices: online business activity, delivery or carry-out services, and remote work arrangements. We also examine the breadth of digital adaptation using an additive index capturing the number of practices adopted. The results show that all three digital adaptation practices are positively and statistically significantly associated with crisis-related innovation. The digital adaptation index is also positively associated with innovation, indicating that firms adopting a broader set of digital practices were more likely to report introducing new or improved products or services in response to COVID-19. These relationships remain robust among small- and medium-sized enterprises (SMEs). We further examine whether government digital support moderates the relationship between digital adaptation and innovation, but due to small sample size, the results are suggestive and not robust across estimation methods. Overall, the findings provide firm-level evidence on the relationship between crisis-driven digital adaptation and firms’ capacity to innovate during a major disruption in selected MENA economies.