Does the use of digital tools improve a firm’s performance?

The global pandemic caused by COVID-19 still has a significant impact on the relationships established between different economic agents. In fact, the simultaneous supply and demand crises resulting from the restrictions on mobility and the long confinement to which the vast majority of countries were subjected have had appreciable effects on the forms of organization and communication of companies “that can affect the key structures of how a company does business” (Kraus et al. 2022, p.1; Bouncken et al. 2022), as well as changing the way in which companies interact with consumers. Therefore, in order to ensure business continuity and to avoid or reduce the problems of physical distance from customers (Asokan et al. 2022), many SMEs, especially those in traditional industries, were forced to invest in digital transformation, despite having little or no experience in this area (Soto-Acosta 2020).

Hence, businesses have been severely disrupted by the economic and social restrictions imposed during the health crisis (Dejardin et al. 2023). With the pandemic, the importance of digital transformation was understood (Yikilmaz 2021), and the digitalization process of companies from all industries was accelerated (Galindo-Martín et al. 2023; Kraus et al. 2019), converting the pandemic crisis to a catalyst for change and setting digital transformation as an indispensable trend in all sectors (Hai et al. 2021). This cushioned the significant economic impact experienced and constituted a hopeful alternative to return to a path of normal activity, for the most affected sectors (retail, entertainment, personal services, restaurants and hotels) (Bartik et al. 2020; and Ionescu-Somers and Tarnawa 2020).

Beyond the negative expectations generated in the short and medium term following the outbreak of the coronavirus, there were companies that took advantage of this scenario of forced adaptation to innovative digital tools and online platforms to position themselves in the markets, thus gaining a competitive advantage and considering technology as key driver as well as an instrument for achieving a competitive advantage through digital transformation, as has been seen in Kraus et al. (2021). Research suggests that digitalization presents a distinct opportunity to enhance the global competitiveness of European companies (Galindo-Martín et al. 2023, p. 1810) and has positive effects; however, limited evidence exists on the effects of digitalization on business performance (Kohtamäki et al. 2020) and on the situation during the pandemic crisis.

Digitalization contributes to value creation (Sommarberg and Mäkinen 2019) and at present is primarily driven by some key technologies that have evolved in recent years (Ribeiro-Navarrete et al. 2021). Digital technologies and tools can be used in business to obtain a competitive advantage that is essential to survive competition in some sectors. For instance, the adoption of new digital tools in the manufacturing and service sectors involves new challenges and bestows a greater importance to knowledge-intense activities (Martínez-Caro et al. 2020). Although digitalization is a growing phenomenon that impacts businesses’ strategies and processes and has potential benefits for firms’ performance (Truant et al. 2021; Chatterjee et al. 2023), there is a lack of evidence regarding the influence of digital tools on firms’ performance with an overview of the COVID-19 context.

To fill this research gap and draw on the use of digital tools to improve firms’ performance (Bruskin 2017; Westerman 2011), the main aim of this study is to analyze if there is an impact on the adoption, implementation and use of digital tools during the COVID-19 crisis. In this respect, the contribution of this study to the academic literature is threefold. Firstly, we ask whether the health crisis has significantly acted as a catalyst for the adoption of digital tools by companies; secondly, we ask whether the pandemic has led to changes in the use of these tools and whether there is a belief that these changes will be permanent over time; and finally, we ask if digitalization has positively affected certain performance variables of companies – specifically, whether it has led to an increase in sales and employment levels, taking into account the diversity of digital tools and platforms and their uses.

To answer these questions, the database of a pandemic survey (February 2021) included in The Future of Business Survey (FOBS), an ongoing collaboration between Facebook (now Meta), the Organization for Economic Cooperation and Development (OECD) and the World Bank, has been used. The selected sample includes Facebook page administrators from businesses in 27 countries located in different geographic areas around the world, with an extensive sample of 181,509 owners or managers.

Our analysis shows that the pandemic accelerated the process of digitalization in companies. Moreover, a greater use (72%) of one or more digital tools for communication was adopted, and this change is to be permanent. Finally, our analysis also illuminates the use of digital platforms and online tools improving firms’ performances.

In the academic literature, digitization and digital transformation (or digitalization) are often used synonymously although they are expressions with different meanings. The term ‘digitization’ refers to the adoption and use of digital technologies to introduce changes (Noroozi et al. 2010; Li et al. 2016) influencing the value chain. The wide variety of technologies and tools that can be used includes the Internet, e-commerce, social media, big data, cloud computing, the Internet of Things, advanced automation, artificial intelligence and machine learning (OECD 2016; Kotarba 2017; Rachinger et al. 2019; Ulas 2019). The use of these technologies is focused on three directions: optimizing activities or processes (digitization of activities) or facilitating or developing new activities (digitization focused on resources) focused on stakeholder linkages that are aimed at establishing and maintaining communication by creating a network. Faced with the diversity of digital solutions, companies are considering which of the different technologies they should adopt to obtain benefits, related to gaining a competitive advantage (Pagani and Pardo 2017; Lee et al. 2020).

When referring to digital transformation, what is meant is profound changes in corporate identity, organizational structure, company activities, business processes, strategies, innovations and rules of the game and culture due to the use of digital technology (Bondar et al. 2017; Heavin and Power 2018; Hess et al. 2016; Hingings et al. 2018 Liu et al. 2011; Matt et al. 2015; Parviainen et al. 2017; Schallmo et al. 2019a, b; Vial 2019; Warner and Wäger 2019). All this undoubtedly requires competences or skills. However, at the same time, digital transformation could represent a change in the trajectory or evolution of the company, a change in the business model or a change or increase in competitive advantage (Garzoni et al. 2020).

Therefore, digitalization refers to a sociotechnological process, and digitization is exclusively a technical process (Tilson et al. 2010). The two perspectives are, however, hard to separate and will be addressed together in this paper.

As early as the previous century, studies by authors Gatignon and Robertson (1989) showed that there was a positive influence of competitive pressure on technology adoption. In this sense, and considering the situation caused by the pandemic, Klein and Todesco (2021) argued that the adoption of digital tools can be considered as a competitive advantage and present a window of opportunity for business survival, especially for SMEs in traditional industries or in the most affected sectors, such as the service sector, the manufacturing sector and the hospitality sector, which are among the most vulnerable to a crisis (Kraus et al. 2020). Hence, there was a need for investment in digital transformation, to ensure business continuity (Soto-Acosta 2020), as well as to avoid or reduce the problems of physical distance from customers and the financial crisis (Asokan et al. 2022). Therefore, the current economic context has pushed companies towards a digital transformation as a solution to avoid a total economic collapse (Soto-Acosta 2020).

In recent years, technological advances focused on data, information and knowledge have led to the advance of digitization, a process that started a few decades ago and has accelerated in the wake of the pandemic crisis. Thus, nearly half of EU companies claim to have invested in digitization in response to COVID-19 (European Investment Bank 2022). The changes introduced by digitalization have been so significant that they have become one of the most powerful drivers of the current economic system (Vitolla et al. 2020; Salvi et al. 2021). There is a growing range of digital tools available to entrepreneurs that offer them different utilities: social networks, digital marketing, e-commerce, the Internet of Things, cloud computing, big data, artificial intelligence and virtual reality (Rindfleisch et al. 2017; Nambisan 2017).

In fact, according to a recent study by Gavrila et al. (2021), many SMEs transformed traditional sales channels to web portals, digital marketplaces and mobile applications and began to use and have a more active presence in social networks, fostering online commerce (Fosso Wamba and Carter 2016), understood as “a form of Internet-based social networking that allows people to engage in the marketing and sale of products and services in online marketplaces and communities” (Stephen and Toubia 2010). While the main purpose of social networks is communication between different stakeholders, they have also become a meeting point between customers and suppliers (Gummensson 2002). Facebook is one of the leading social commerce platforms, with around 2930 million active users (Facebook Statistics 2022). Moreover, Facebook is seen by small businesses as a communication channel with consumers (Rugova and Prenaj 2016), facilitating interaction and fostering collaborations (Palmer and Koenig-Lewis 2009) and, therefore, contributing to their immersion in the digital environment and also facilitating the initiation of internationalization processes (Omar et al. 2018). In this sense, our first research hypothesis focuses on investigating whether the pandemic motivated the adoption of digital technologies for communication by companies (Priyono et al. 2020).

H1: The pandemic has prompted the adoption of digital technologies for communication.

Given the availability of data, this hypothesis is further disaggregated into the following technologies for communication: (a) web; (b) email; (c) Facebook; (d) Facebook Messenger; (e) Instagram; (f) phone and text messaging; (g) postal mail; (h) X (formerly Twitter); and (i) WhatsApp.

Additionally, the periods of confinement and mobility restrictions that were implemented to control the COVID-19 pandemic have generated very noticeable effects on economic activity worldwide, resulting in business closures, huge economic losses (Asad et al. 2021; Gavrila et al. 2021), workforce reductions, transformation from face-to-face to online work, changes in demand and disruptions in supply chains, among others (Bartik et al. 2020). The alteration of consumer habits has placed significant pressure on local businesses which, in addition to outstanding debts and financial difficulties (Syriopoulos 2020), had to face new competitors in digital commerce and the use of new technologies (Tolba et al. 2022; Autio et al. 2021). COVID-19 has changed the rules of the market, forcing companies to adopt innovative practices in order to survive, becoming an external enabler for the digitalization of companies (Priyono et al. 2020; Davidsson et al. 2021). Therefore, we propose the following hypotheses:

H2: As a consequence of the pandemic, there have been changes in the use of digital tools.

H3: Changes in the use of online tools due to the pandemic will be permanent.

Advances in information and communication technologies (ICTs) and digitalization processes, in general, have been accelerated considerably in recent years, generating the need for constant updates to actively participate in an increasingly dynamic and interdependent society (Upadhyay et al. 2021; Morrar et al. 2017), in line with what is already being called the fourth (Schwab 2016) and fifth (Sarfraz et al. 2021) industrial revolutions. This need is felt by both companies, regardless of their size and sector of activity, and individuals (Parviainen et al. 2017; Penco 2022).

On the other hand, this study goes a step further and aims to determine whether digitalization contributes to certain business performance variables (Kraus et al. 2021; Priyono et al. 2020; Amankwah-Amoah et al. 2021; Ferreira et al. 2019), from the point of view of employment (H4) understood as growth (Estrin et al. 2022; Bi et al. 2017) and sales (H5), in a situation resulting from the crisis caused by COVID-19.

H4: Digitalization generates employment growth in firms.

Since digitization can be understood in terms of platforms such as social networks (Brink 2017; Fosso Wamba and Carter 2016), broadband Internet (Colombo et al. 2013), digital marketing (Taiminen and Karjaluoto 2015; Pradhan et al. 2018; Saura et al. 2023), e-commerce (Gregory et al. 2019), the Internet of Things (Quigley and Burke 2013) and the use made of all of these, hypothesis 4 is broken down into the following two hypotheses:

H4a: The adoption of digital platforms influences employment growth in enterprises. This hypothesis can be made for each of the digital platforms that can be used.

H4b: The different uses of digital platforms increase employment in firms.

and (H5) related to sales:

H5: Digitalization leads to an increase in business sales.

From the point of view of the platforms and the use made of them, this hypothesis is broken down into the following two hypotheses:

H5a: The adoption of digital platforms influences firms’ sales growth. This hypothesis can be made for each of the digital platforms that can be used.

H5b: The different uses of digital platforms lead to increased sales for companies.

This study aims to make a valuable contribution to the academic literature by showing whether the pandemic has motivated the adoption of digital tools and whether this digitization has been an advantage for companies.

In order to test these hypotheses, we used one of the databases from The Future of Business Survey (FOBS)¹, which is an ongoing collaboration between Facebook (now Meta), the OECD and the World Bank since 2016 to collect online information from small and medium-sized enterprises around the world on their business conditions, challenges and operations. However, since the onset of the COVID-19 pandemic in 2020, these institutions flagged the need to conduct the surveys more frequently in order to learn about the impact of COVID-19 on businesses of all kinds and the adaptations they had undertaken as a result of the pandemic (Schneider 2020). The chosen database collects information on the impact the pandemic was having on businesses, as well as changes in digital tools and their uses by businesses. This method is considered suitable for data collection and statistical analysis in the case of this study object (Alsufyani and Gill 2022; Rahi et al. 2019).

The target population are the Facebook Page administrators of businesses, who can be owners or managers reaching around 80 million businesses worldwide. Once the sample size has been selected (400 owners or managers in each country) and the survey has been conducted on the Facebook platform itself, a weighting is conducted based on the population to be represented (Schneider 2020). The database used in this paper is from the survey conducted in February 2021, during the pandemic, with a sample of 181,509 owners or managers from 27 countries. The sample selection used to exclude respondents was based on the activity of the business. Thus, if the business was active, it was included in the sample, otherwise the respondent was excluded.

In relation to the dependent variables, 10.9% of the companies that responded to the survey stated that they had increased the number of employeees, and 15.2% stated that their sales had increased.

The characteristics of the companies are as follows: most are located in North America (47.4%, with responses received only from the USA), 26.9% in Europe, 14.6% in Australasia, 6.6% in Latin America and 4.5% in Africa. In total, 78.2% operate in the service sector, 8.5% in construction, 8.3% in industry and 3.9% in the primary sector; in relation to their size, 7.4% are self-employeed individuals, 25.3% are small enterprises, 34.6% are medium-sized enterprises and 32.1% are large enterprises; the average age of these businesses is 7.6 years, the possibility of teleworking is 1.5², and 18.9% have switched to the use of digital tools.

The purposes for which companies used digital tools are more than one (1.8 on average): digital tools were being used for communication with customers (34.9%), advertising (28.1%), coordination of workers (24.8%), sales (23.5%), recruitment of workers (20.7%) and business analysis (15.7%).

Companies also use more than one platform (1.7 on average). As would be expected, given that the survey is conducted by Facebook, the platform most frequently used by the companies surveyed is Facebook (32.6%), followed by other online calling tools (22%), Google Docs or Gmail (21.1%), Zoom (18.8%), Microsoft Meeting Tools (17.2), WhatsApp (17.1%) Instagram (17%); Facebook Messenger (13.2%), X (formerly Twitter) (8.2%), WhatsApp Business (5.7%) and BlueJeans (1.2%).

Annex 1 presents the descriptives of the dependent and independent variables that have been considered.

To evaluate the first three hypotheses, a univariate statistical analysis and a contingency table analysis of several dimensions were conducted to examine the independence between qualitative variables. Therefore, the null hypotheses of independence of the attributes were assessed, and if these were rejected (i.e. there is a relationship between the variables), it was proposed to use a Logit analysis to determine the degree of association between the variables.

Thus, in order to evaluate the last two hypotheses, and given that the two dependent variables related to business impact are binary, two Logit analyzes were conducted (Long and Freese 2014, Cramer 2003, Pérez López 2004). These variables are increase in sales and hiring of employeees. As independent variables, in both models, we included the geographical area of origin (grouping countries), the sector of activity and the firm age and size as variables that define the characteristics of the activity. We also considered other variables related to the digitalization of this activity: the possibility of teleworking, changes in the use of online tools, the different uses of digital tools and the different platforms used.

To answer the first hypothesis, H1: The pandemic has motivated the adoption of digital technologies for communication, we used the FOBS survey’s questions which directly ask respondents about the adoption of various communication tools since the onset of the COVID-19 pandemic. The results obtained (Table 1) evidence that the pandemic has had a significant impact on the adoption of digital tools, with only 28% of respondents not having adopted any digital tools for communication in the wake of the coronavirus crisis. In other words, 72% of the more than 29,400 respondents have adopted one or more digital tools for communication. It should also be noted that this effect has not been equal for all tools considered by Facebook, OECD and the World Bank; the two tools that have been adopted most (by 43% of respondents in both cases) as a result of the health crisis have been email and telephone (along with SMS text messaging services). Not surprisingly, these are two of the basic communication tools and far outweigh the adoption of Facebook (26%) and any other digital tool (WhatsApp, 18%; Instagram, 13%; web, 10%). However, the results in Table 1 also show a high standard deviation, revealing the existence of a high dispersion among the responses received. These results allow us to accept the first null hypothesis, so that we can affirm that the pandemic has indeed motivated the adoption of digital technologies for communication.

To confirm the second hypothesis (H2: As a consequence of the pandemic, there have been changes in the use of digital tools), the question asking whether, as a consequence of the pandemic, there have been changes in the use of online tools, was used; and to validate the third hypothesis (H3: The changes in the use of online tools due to the pandemic will be permanent), the question asks whether these changes will be permanent or not, in the opinion of the respondent, was used.

In relation to the incorporation of changes in the use of online tools (Table 2), 33% of the 28,059 respondents stated that they have introduced changes as a result of COVID-19. Moreover, of these, 75% believe that these changes will be permanent, although a wide disparity in the results, as evidenced by the high standard deviations, was obtained.

The results obtained from the FOBS allow us to accept the null hypotheses 2 and 3 and support that the pandemic has accelerated the process of digitization in companies, although the level of digitization perceived is basic.

The results of the binary logistic regression models on the employment and sales variables (Table 3 and annex Figs. 1 and 2) seem to support the hypotheses that argue for a positive effect of digitization on firm performance, measured as an increase in staff hired (H4: Digitization leads to an increase in firm employment) and an increase in sales (H5: Digitization leads to an increase in firm sales).

The use of different online tools increases the probability of increasing sales, in particular, when it comes to the use of tools for online sales (47% more likely to increase sales) or for business analysis or hiring people. These results confirm the fifth null hypothesis (H5b: The different uses of digital platforms lead to an increase in firms’ sales). The effects on employment, on the other hand, are not so evident, and although the use of digital tools for advertising, recruitment and coordination of workers yields the expected positive results, the majority of uses do not seem to be related to employment or, even worse, this is negative in the case of the use of instruments for online sales, which could perhaps be pointing to a process of substitution of physical or face-to-face sales channels with high demand for personnel by digital sales. Therefore, the results do not allow us to fully confirm the null hypothesis H4b: The different uses of digital platforms increase employment in firms.

In the case of the online platforms addressed by Facebook, the OECD and the World Bank, the positive effect on sales is small, with the exceptions of those companies that choose to use BlueJeans and X, whose use increases the probability of increasing sales during the first year of the pandemic by 38%. Thus, the results obtained only allow us to validate the null hypothesis H5a: The adoption of digital platforms influences the increase in sales of companies for some platforms (BlueJeans and X). The relationship of online platforms with employment points to two social networks, Instagram and Facebook, together with the use of WhatsApp Business, as the tools that have the greatest impact on the probability of having hired more staff during the pandemic. In the opposite direction, companies using X, Messenger and other calling or video calling tools (other than Microsoft tools) are between 68% and 42% less likely to have hired. Again, these results lead us to accept the null hypothesis H4a: The adoption of digital platforms influences employment growth in firms only for some platforms (Instagram, Facebook and WhatsApp Business).

Finally, control variables are firm size, where there is no doubt that the larger the firm size, the greater the positive effect; firm age, which reveals an inverse relationship with the probability of better business performance; and the possibilities of teleworking (Heidt et al. 2023), which, in line with expectations, increase the probability of increasing sales and employment. Moreover, the greatest positive effects on sales and employment increases derived from digital tools are observed in North America; these effects could be related to sociocultural factors, ease of access to digital tools and platforms, the internationalization of their economy, market regulations and facilities in payment systems, among others. Surprisingly, however, the effect of the use of digital tools on employment and sales seems not to be affected by the sector of activity, despite other studies such as Truant et al. (2021) recognizing this relation.

Previous studies have already indicated that the competitive pressure of the markets influences the decision to adopt new technologies that allow companies to develop a competitive advantage or find new business opportunities (Bouncken et al. 2022; Kraus et al. 2022). The pandemic has provided a stimulus for digital transformation (Dejardin et al. 2023; Galindo-Martin et al. 2023; Kraus et al. 2019; HBS 2020 and Soto-Acosta 2020) and has motivated the adoption of digital tools by the majority of companies globally (European Investment Bank 2022), as our results indicates 72% of companies reported having made changes in the use of digital communication tools. Digitalization acts as a powerful driver of the economic system (Vitolla et al. 2020; Salvi et al. 2021; Kraus et al. 2021) and seems to, among other effects, offer a competitive advantage to firms (Pagani and Pardo 2017; Lee et al. 2020).

The diversity of technologies developed in recent decades, and especially all the tools aimed at offering digital solutions with different uses and effects, forces companies to determine which are the most appropriate for improving performance and competitiveness (Kohtamäki et al. 2020). Indeed, our results show that the effects of different digital tools, platforms and uses were not uniform, and there were differences between them. Positive effects differ among tools for internal communication and those for communication with customers. Furthermore, the teleworking possibilities offered by digitalization have a positive effect on business performance in line with Bartik et al. (2020) and Fernandez-Portillo et al. (2024). Although, in principle, this dilemma is common among all companies, regardless of size and sector of activity, it is more pressing for those with fewer resources and capabilities (SMEs and family businesses). Firm size was identified as a variable that conditions the digitization process (European Investment Bank 2022, Truant et al. 2021) and its effect on performance measured in terms of jobs and sales (Eller et al. 2020). Therefore, digitalization can contribute towards increasing operational efficiency and market flexibility (Rosin et al. 2020), maximize employee skills and corporate digital strategy and improve business performance through ICT (Eller et al. 2020), as our results also proved.

During the pandemic, digitization offered an advantage to firms by increasing the probability of increasing their sales and employment levels compared to non-digitized firms, in line with Rubino et al. (2019), Lee et al. (2020), Kohtamäki et al. (2020) and Syaifullah et al. (2021). Therefore, this research reveals that, during the pandemic, the tools introduced were aimed at strengthening customer relations, but other uses, such as teleworking and tools for internal use, had a significant impact on business efficiency.

Our results also state that digitalized firms increased their probability of improving sales and employment compared to non-digitized firms. However, the question of which technological solution is optimal for each company that allows it to improve its performance and competitiveness remains, although it is possible that the same technological advances can help in the advancement of these decisions.