Firm dynamics in times of COVID: evidence from Egyptian firms

in: ERF Working Paper Series No. 1586

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 The COVID-19 outbreak has had severe economic consequences across the globe. The crisis emanating from the pandemic has caused demand and supply side shocks, which are more far reaching than any crisis in living memory. We use a new data set from the 2020/21 Egyptian Industrial Firm Behavior Survey (EIFBS) to examine determinants of firms’ resilience during the COVID-19 pandemic. Crisis present the opportunity for what Schumpeter (1934) called creative destruction. Have manufacturing firms been all hit by the crisis equally, or were less efficient firms more likely to exit or downsize their activities thereby ‘cleansing’ the market? Two sets of factors affect firm dynamics and survival: 1) firms’ innate characteristics, such as formality and export status, sector, ownership, age, size and location and; 2) firm behavior which captures the extent to which good managerial practices, innovation, the adoption of advanced technologies and worker training have provided an opportunity for firms to adapt their business models and show greater resilience in coping with the crisis. Our main findings illustrate the vulnerability of private, smaller, informal firms and those that are not located in industrial zones. Also, as expected, pre-COVID behavioural characteristics matter for firm dynamics. The food sector and sectors identified as ‘COVID sectors’ show more resilience. More nuanced results show that the effect of some behavioral traits vary by sector and are more influential depending on firm size.

About the author

El-Haddad, Amirah

Economy

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