Spanish non-financial corporations and the COVID pandemic: vulnerability, resilience and transformation

Vicente Salas-Fumás

doi:10.1108/aea-11-2020-0157

Abstract

Purpose This paper aims to assess the vulnerability and resilience of the Spanish non-financial corporations (NFC) to the shock from the COVID pandemic with consolidated income accounts data, and shows comparative labor productivity and endowment of organizational capital of Spanish firms, as indicators of their capabilities at the outset of the new digital transformation wave proposed by the next generation EU program. Design/methodology/approach The paper first describes the recent evolution (quarterly 2020 data) of the Spanish non-financial corporate sector (gross value added, labor cost, capital formation, profits) in the assessment of the vulnerability and resilience of the sector to the shock of the COVID pandemic. Then second, it estimates a probit model to evaluate the EU country effects in the explanation of the different propensity firms in the European Company Survey database to adopt innovative management and organization practices. Findings In the Spring of 2020, the Spanish NFC were still recovering from the great recession (low resilience), and the severe contraction in value-added and profits of the corporate sector in the first three quarters of the year evidences its high vulnerability. The proved complementarity between organizational and information related assets implies that the low endowment of organizational capital of Spanish firms, could be a severe limitation for the advancement toward digitalization. Research limitations/implications The aggregate corporate sector data used in the analysis of vulnerability and resilience of Spanish firms does not account for the heterogeneous effects of the pandemic across economic sectors (manufacturing and services, for example) and across firms (large versus small ones). Originality/value The paper complements the country-level analysis of the impact of the COVID pandemic in the Spanish economy with the analysis of the impact of the pandemic in the performance of the corporate sector. It provides one of the first analysis of the current endowment of organization capital of Spanish firms and highlights its relevance for productivity growth.

Highlights

The political economy’s responses to the economic crisis resulting from the COVID-19 pandemic in Spain will be articulated in this paper around three concepts: vulnerability, resilience and transformation
The European Commission, jointly with the governments of the EU members, have decided to change the focal point of the recovery from the COVID pandemic, from the path of activity that the pandemic interrupted in March 2020 to a new and different one, with greener and more digital economies that deliver at least similar levels of output but with more inclusion and less environmental damage
For a country such as Spain, these political decisions pose at least two important questions: First, will the specialization of the Spanish economy, with high concentrations of activity in sectors such as tourism and hospitality, and high endowment of tangible transportation infrastructures, be able to generate sufficient private and social return from this specialization and tangible resources? second, is the Spanish productive sector ready for the changes demanded by the transformation ahead?

Summary

Introduction

The political economy’s responses to the economic crisis resulting from the COVID-19 pandemic in Spain will be articulated in this paper around three concepts: vulnerability, resilience and transformation. Vulnerability will be assessed through the magnitude of the contraction in business activity, employment and capital investment in the Spanish corporate sector, directly and indirectly, attributed to the pandemic. Resilience refers to the capacity of the corporate sector to recover from the shock, i.e. the time needed to return to the pre-shock level and trend of output, employment and capital investment. The NGEU changes the focal point of the recovery, from the level and composition of output and the trends at the time of the shock, to a similar level of output, but with a different composition, namely, greener and more digitally adept. Transforming the economy, including the corporate sector, is, clearly, more challenging than returning to the pre-COVID path

Objectives

Findings

Conclusion