SME digital transformation and the COVID-19 pandemic: a case study of a hard-hit metropolitan area

Abstract

Cities and regions are facing diverse challenges, and the transformation to a digital economy is a core issue. The coronavirus disease-2019 (COVID-19) pandemic has had widespread impacts on business, and it has heightened the need for digitalization. We analyse if and to what degree the COVID-19 pandemic has accelerated the digital transformation of small and medium-sized enterprises (SMEs) in the metropolitan region of Madrid. Our research strategy is based on a quantitative analysis of survey data at the company level. Our results show that a large share of SMEs invested in digital technologies as a response to the pandemic, but there are also important differences between basic and more advanced digital technologies and between manufacturing and service sector firms. SMEs’ previous knowledge and technological resources and capabilities, as well as their collaboration networks with providers are found to trigger adoption of digital technology. Implications for postpandemic policies are highlighted.