Did Digitalization Help Manufacturers Cope with the Covid-19 Pandemic?

ABSTRACT

International organizations such as the World Bank, UNCTAD and International Monetary Fund have suggested that digitalization helps firms to mitigate the negative impact of the Covid-19 pandemic on companies' performance. This chapter attempts to test this suggestion empirically in the context of the manufacturing industry in Malaysia. Based on a balanced panel data of 130 manufacturing industries over the period from January 2020 to December 2020, the empirical finding validates the mitigating role of digitalization in the Malaysian manufacturing industry. The results indicate that an additional increase in the Covid-19 cases per million population is associated with a 0.095 percent reduction in the manufacturing industrial production performance when the country's digital adoption is at the minimum level. However, the adverse impact diminishes with the rising level of digital adoption and reduces to 0.001 percent when the digital adoption reaches the maximum level. This is equivalent to a 98 percent reduction in the negative effect of the Covid-19 pandemic. The effect is substantial, implying that digitalization plays an essential role in helping the manufacturers to cope with the Covid-19 pandemic. © 2023 selection and editorial matter, Rajah Rasiah, Wah Yun Low, and Nurliana Kamaruddin;individual chapters, the contributors.