adjustments in modes of production or service delivery, which can likely range from higher online interactions with customers<sup>16</sup> and digital marketing to a gradual adoption of digital payments. As SMEs largely cater to their respective locales, they are more likely to start or increase delivery of goods, services or carry outs by 8 percentage points. Figure A2 in the Annex shows this is predominantly explained by smaller firms, which are more likely to start delivery or carryout by over 9 percentage points.

Large firms, however, have been generally better at adapting to remote working arrangements. Compared to large firms, SMEs are less likely to start or increase remote work by 30 percentage points, effectively exposing more of their workers to health risks.<sup>17</sup> Consequently, SMEs have 7 percentage points less of their workforce working remotely. Remote work is particularly problematic for smaller firms, which are less likely than larger firms to employ remote working arrangements by 33 percentage points, compared to 18 for medium firms (see Figure A2). This is likely attributed to the lack of existing infrastructure and digitally-savvy employees among smaller firms, even in high-income economies like Japan (OECD, 2020a).

As supply-chains face disruption, smaller firms have little to no alternatives. Lockdowns in China, the European Union and the United States have had negative spillover effects on global trade that limit foreign market access as a response (International Trade Centre, 2020). Where these opportunities exist, larger firms seem more capable of increasing exports. Large firms, however, can also be most affected by this channel given their greater participation in global supply chains. This is the case in certain countries like Italy, where bigger shares of large firms than SMEs reported increased exports, and bigger shares reported decreased exports.<sup>18</sup>

**Figure 6: SMEs cope with the crisis differently than large firms**

<!-- Start of picture text --> If decreased workforce, number of workers laid off due to the<br>COVID-19 outbreak<br>Current proportion of workforce working remotely<br>Percent of firms adjusting or converting their production or<br>services<br>Percent of firms that started or increased remote work<br>Percent of firms that started or increased online business activity<br>Percent that started or increased delivery of goods, services or<br>carryout<br>-40 -30 -20 -10 0 10 20<br><!-- End of picture text --> Source: World Bank Enterprise Follow-Up Surveys Note: Chart illustrates the average difference between SMEs and large firms within a country-sector pair with their standard errors. Country-sector fixed effects are included. Stratification weights adjusted for the followup enterprise surveys according to median eligibility were used to produce the estimates. The weights account for non-response, assuming that businesses that could not be re-contacted (unobtainable) have exited the market

- 16 The usage of messenger apps could be one key measure.

17 This is supported by the World Bank’s COVID-19 Business Pulse Surveys (COV-BPS) that capture firmlevel impacts, which found that digital solutions are more likely to be adopted by larger and formal firms. 18 This also likely depends on the sectoral composition of these firms.

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