Fig. 10. Firms’ responses during the COVID-19 crisis (% of firms) <!-- Start of picture text --> 90<br>80<br>70<br>60<br>50<br>40<br>30<br>20<br>10<br>0<br>Permanently Temporarily Sales decrease Policy support Start/increase Start/increase Start/increase<br>closed closed (%) online sales delivery remote work<br>MENA LMI UMI<br><!-- End of picture text --> _Source:_ the authors’ calculations based on COVID-19 Follow-up Enterprise Surveys. _Note_ : The MENA region is represented by Jordan, Lebanon and Morocco.

In the following, we aim to shed light on how firms’ outcomes and responses during the COVID-19 crisis have varied by firms’ management quality, past innovation and digitalization, as well as by ownership and trading status. We examine which firms closed temporarily or permanently, which saw larger drops in sales or employment relative to 2019, as well as which firms were more likely to receive government support. We then examine firms’ responses and adaptations, such as whether they started or increased business activity online, delivery or carryout or remote work, as well as looking at the share of online sales in total sales and the share of the workforce working remotely. Figure 10 reports some stylized facts for economies in the MENA region. Given that only three MENA countries are covered by the COVID-19 Follow-up Enterprise Surveys, the econometric analysis is based on a larger sample of more than 18,000 firms in 32 economies in MENA, Europe and Central Asia.<sup>13</sup> Figure 11 illustrates differences in predicted probability of starting (or increasing) online business activity and remote work according to different firm characteristics, while controlling for firm size and age. We find that firms’ pre-COVID-19 characteristics and performance influence both firms’ adaptability and the severity of the outcomes they experienced during the pandemic.<sup>14</sup> Firms that were growing faster before the pandemic, had higher management quality, were more innovative and digital (having a website) before the crisis experienced smaller losses and adapted better during the pandemic. They were more likely to have started or increased business activity online, delivery or carryout or remote work; they also had higher shares of online sales and remote workers. These differences hold up when controlling for firms’ other characteristics such as their age and firm size. They are both statistically and economically meaningful. For example, innovative firms – which introduced a new product, service or process in the three years before the COVID-19 crisis – were almost 50% more likely to start or increase remote work during the pandemic than firms that had not

> 13 The results of the econometric analysis are broadly similar when we focus on the three MENA countries covered: Jordan, Lebanon and Morocco. The full list of countries in the sample includes Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, Georgia, Greece, Hungary, Italy, Jordan, Kazakhstan, Latvia, Lebanon, Lithuania, Malta, Moldova, Mongolia, Montenegro, Morocco, North Macedonia, Poland, Portugal, Romania, the Russian Federation, Serbia, the Slovak Republic and Slovenia.

> 14 The definition of the variables are listed in Table A3. Regression results with a longer list of firm characteristics are reported in Tables A4 and A5.

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