The impact of government financial aid and digital tools on firm survival during the COVID‑19 pandemic

This study explores the effect of bail out capital and digital diversification by small- and medium-sized enterprises (SMEs) on their propen sity to survive during and after the COVID-19 pan demic. Using a random sampling of 5469 SMEs from 16 European countries, collected by the World Bank Enterprise Survey in May 2020, January 2021, and May 2021, we conduct a two-stage estimation to examine factors that first affected the propensity of SMEs to access bailout capital, and second, fac tors that increased the propensity of SMEs to sur vive longer during and after crises. Two key findings emerge. Diversification of government financial aid and the adoption of various digital tools to leverage the effect of shock by SMEs increase their propen sity to survive by sized firms. Moreover, government f inancial aid does not moderate the effect of digital tool adoption on the propensity to survive. Policy insights and implications are also discussed.