Impact of COVID-19 on the efficiency of business in Southern Siberian regions: Spatial and sectoral aspects

Abstract

The COVID-19 pandemic was one of the biggest global crises of the 21st century, affecting all economic sectors, and Russia was no exception. Russian researchers have shown that the losses from the pandemic varied widely across sectors and regions: the service sector and large cities with high population density suffered the most. However, spatial and agglomeration effects at the micro level have been little studied in the context of COVID-19. Here, we show that during the pandemic, the influence of neighbouring firms on each other decreased, but the positive impact of agglomeration effects on firm performance increased. Using multilevel models and geographically weighted regressions, we constructed separate regressions for 2019 and 2020 explaining the sales margin of South Siberian firms by their individual, spatial and regional characteristics. Entertainment, service and transport companies were the most affected, which is consistent with the results of other studies. We also obtained new results: neighbours’ performance affected positively the firm performance in 2019, but during the pandemic the influence of neighbours became insignificant, a high level of digitalisation helped firms to survive the pandemic, and quarantine restrictions in the region had little impact on business performance. The findings can help develop an effective strategy to combat the economic impact of the pandemic and support businesses. We expect our study to improve understanding of what happens to firms during a pandemic and quarantine. The results may be useful outside the COVID-19 context: spatial and agglomeration effects also operate for firms outside the pandemic.