Government Support and Institutions’ Intermediation throughout Companies’ Adaptation to the COVID-19 Crisis

Abstract

The current health and economic crisis is an unprecedented event in the recent history of humanity. Given the lack of treatment and the rapid spread of the virus, several countries and/or local governments had to adopt measures of social distancing and movement restriction. The scenario set by the pandemic, therefore, brought up the need for quick adaptation and innovation, so companies could avoid liquidity and bankruptcy issues. Additionally, as a means to prevent firms’ problems from generating a major macro-economic crisis, governments had to offer a range of support programs as ways to sustain employment and income. Given the dire need to find new ways to conduct businesses, this article sought to understand whether or not government support is a key factor for organizations to adjust or convert—totally or partially—their products or services. The applied methodology was logistic regression, and to solve eventual endogeneity problems, we applied the bivariate Probit model. More than 11,000 observations were included in the main model. The results showed that government support was an important element for companies to adapt their products and services during the first wave of COVID-19. Therefore, companies in countries with stronger institutional environments performed better than those in weaker settings.