Global Pandemic Shocks, Foreign Exposure and Firm Productivity: Evidence from Korean Firm-level Data
Date:
4 March 2025Category:
COVID-19, Labour and MigrationType:
Discussion PapersTags:
Global Pandemic, COVID-19, firm productivity, resource allocation, labour shedding, R&D, MNEsPrint Article:
This study analyses the impact of the COVID-19 pandemic on a firm's total factor productivity (TFP) using Korean firm-level data from 2016 to 2021. The study reveals that the pandemic had a heterogeneous impact on firm TFP depending on the firm's operational characteristics, specifically whether the firm is a multinational enterprise (MNE) or a pure exporter (non-MNE). Whilst the pandemic had a more significant negative impact on the TFP of pure exporters than other firms, MNEs were less affected by the pandemic shock than pure exporters. This implies that whilst both firms were exposed to negative demand shocks on a global scale, MNEs were better equipped to handle supply-side uncertainties through international diversification. The study identifies certain characteristics of MNEs that helped buffer the pandemic shock, such as shedding labour, high R&D intensity, and more diversification via foreign subsidiaries. These characteristics enabled MNEs to mitigate the pandemic shock and even increase their TFP during the pandemic.
