Digital Resilience: How Work-from-Home Feasibility Affects Firm Performance

39 Pages Posted: 22 Mar 2021 Last revised: 20 Jul 2021

See all articles by John (Jianqiu) Bai

John (Jianqiu) Bai

Northeastern University - D'Amore-McKim School of Business

Erik Brynjolfsson

National Bureau of Economic Research (NBER); Stanford

Wang Jin

Massachusetts Institute of Technology (MIT)

Sebastian Steffen

MIT Sloan School of Management

Chi Wan

University of Massachusetts Boston - Department of Accounting and Finance

Date Written: March 2021

Abstract

Digital technologies may make some tasks, jobs and firms more resilient to unanticipated shocks. We extract data from over 200 million U.S. job postings to construct an index for firms' resilience to the Covid-19 pandemic by assessing the work-from-home (WFH) feasibility of their labor demand. Using a difference-in-differences framework, we find that public firms with high pre-pandemic WFH index values had significantly higher sales, net incomes, and stock returns than their peers during the pandemic. Our results indicate that firms with higher digital resilience, as measured through our pre-pandemic WFH index, performed significantly better in general, and in non-essential industries in particular, where WFH feasibility was necessary to continue operation. The ability to use digital technologies to work remotely also mattered more in non-high-tech industries than in high-tech ones. Lastly, we find evidence that firms with lower pre-pandemic WFH feasibility attempted to catch up to their more resilient competitors via greater software investment. This is consistent with a complementarity between digital technologies and WFH practices. Our study's results are robust to a variety of empirical specifications and provide a first look at how WFH practices improved resilience to a major, unanticipated social and economic shock.

Suggested Citation

Bai, John (Jianqiu) and Brynjolfsson, Erik and Jin, Wang and Steffen, Sebastian and Wan, Chi, Digital Resilience: How Work-from-Home Feasibility Affects Firm Performance (March 2021). NBER Working Paper No. w28588, Available at SSRN: https://ssrn.com/abstract=3809560

John (Jianqiu) Bai (Contact Author)

Northeastern University - D'Amore-McKim School of Business ( email )

220 B RP
Boston, MA 02115
United States

Erik Brynjolfsson

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Stanford ( email )

366 Galvez St
Stanford, CA 94305
United States

HOME PAGE: http://brynjolfsson.com

Wang Jin

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Sebastian Steffen

MIT Sloan School of Management ( email )

100 Main Street
Cambridge, MA 02142
United States

HOME PAGE: http://sebastiansteffen.com/

Chi Wan

University of Massachusetts Boston - Department of Accounting and Finance ( email )

Boston, MA 02125
United States

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