Digital Infrastructure and Firm Resilience: Evidence from China

We examine the impact of digital infrastructure on firm resilience. Analyzing panel data from listed companies across 306 Chinese cities from 2017 to 2021, we find that firms located in cities with better digital infrastructure experience less severe declines in employment and profits during the COVID-19 pandemic. Our results further show that digital infrastructure bolsters firm resilience by alleviating financing constraints and fostering business innovation. The digital infrastructure effect is particularly strong in non-state-owned, small-scale, low-cash-reserve, and labor-intensive firms.We study the role of digital infrastructure in enhancing firm resilience.Financing constraints and business innovation could be the channels underlying the role of digital infrastructure.We find heterogeneous effects of digital infrastructure on firm resilience in different firms.