The COVID-19 Crisis, Digitalization, and Organizational Change

Krzywdzinski, Martin; Butollo, Florian Working Paper The COVID-19 Crisis, Digitalization, and Organizational Change Weizenbaum Discussion Paper; 44 Provided in Cooperation with: WZB Berlin Social Science Center Suggested Citation: Krzywdzinski, Martin; Butollo, Florian (2025) : The COVID-19 Crisis, Digitalization, and Organizational Change, Weizenbaum Discussion Paper; 44, Weizenbaum Institute, Berlin, https://doi.org/10.34669/WI.DP/44 This Version is available at: https://hdl.handle.net/10419/327151 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Martin Krzywdzinski, Florian Butollo The COVID-19 Crisis, Digitalization, and Organizational Change January 2025 # 44 #44 The COVID-19 Crisis, Digitalization, and Organizational Change ABOUT THE AUTHORS Martin Krzywdzinski, Florian Butollo \\ Weizenbaum Institute, WZB Berlin Social Science Center Contact: [email protected], [email protected] ABOUT THIS PAPER This paper presents the findings of the research project “Automatization, digitalization and virtualization of work in the aftermath of the COVID-19 crisis”. Weizenbaum Discussion Papers present results from the ongoing research of the institute. The series is open for different publication formats such as monographs, technical reports, preprints, working papers and many more. ABOUT THE WEIZENBAUM INSTITUTE The Weizenbaum Institute is a joint project funded by the German Federal Ministry of Education and Research (BMBF) and the State of Berlin. It conducts interdisciplinary and basic research on the digital transformation of society and provides evidenceand value-based options for action in order to shape digitalization in a sustainable, self-determined and responsible manner. #44 The COVID-19 Crisis, Digitalization, and Organizational Change \\ Abstract The study explores the impact of the COVID-19 pandemic on the digitalization and organizational changes in companies across different sectors in Germany. The research addresses the extent to which the pandemic accelerated digitalization, the variations in digitalization focus among companies, and the interplay between technological and organizational changes. Data were collected through surveys conducted in two waves in 2021 and 2022, encompassing 540 and 605 companies, respectively. The research employed ordered logistic regression to analyze the factors influencing digitalization investments. Key findings indicate that the pandemic acted as a catalyst for digitalization, with management awareness and employee acceptance being significant drivers. Notably, there were disparities in digitalization efforts, influenced by the economic impact of the pandemic, sectoral differences, and prior levels of digitalization. While companies with existing digital infrastructure initially led the way, less digitalized companies began to catch up over time. Organizational changes, such as new leadership concepts, cross-functional cooperation, and flexible working hours, were also linked to increased digitalization efforts. The study concludes that the pandemic has not only accelerated technological changes but also necessitated parallel organizational transformations to support these developments. Weizenbaum Discussion Paper The COVID-19 Crisis, Digitalization, and Organizational Change Martin Krzywdzinski, Florian Butollo #44 The COVID-19 Crisis, Digitalization, and Organizational Change \\ Table of Contents 1 Introduction 5 2 State of research and hypotheses 6 2.1. The pandemic as a boost for digitalization 6 2.2. Unequal digitalization processes 7 2.3. Technical and organizational change 9 3 Research design 10 4 Empirical analysis 14 4.1. COVID as a push for investment in digitalization 14 4.2. Inequalities in digitalization during the pandemic 14 4.3. Sectoral differences in major domains of digitalization during the pandemic 17 4.4. Digitalization and organizational change during the COVID pandemic 20 5 Discussion 22 6 Conclusions 25 References 26 #44 The COVID-19 Crisis, Digitalization, and Organizational Change \ 5 1 Introduction The COVID-19 pandemic was widely viewed as a massive crisis and a rupture in the functioning of the economy and organizations. It caused an abrupt collapse of both the demand and supply side, which had a massive impact on the world of work. It was also perceived as an accelerator of technological change, as it was argued that digitalization and automation offered a great opportunity for overcoming the crisis (Amankwah-Amoah et al., 2021; Biondi, 2021; Korinek & Stiglitz, 2021; OECD, 2020). However, some studies question the positive effects of the pandemic on digitalization (Arntz et al., 2024). The effects of the pandemic on the world of work have already been examined by a number of studies. However, these have mainly addressed the impact of remote work during the pandemic, emphasizing issues related to working and living conditions or inequalities between groups of employees (Aloisi & De Stefano, 2022; Babapour Chafi et al., 2021; Smite et al., 2023). The effects of the Covid-19 pandemic on organizational change beyond remote work have not yet been systematically researched. A few studies have investigated the development of investments in digitalization during the crisis (Bellmann et al., 2021) and the strategies of companies in different sectors (Butollo et al. 2024; Dyba & Di Maria, 2023), but a systematic picture of the relationship between the pandemic, the implementation of digital technologies, and organizational change, is lacking. In this paper, we contribute to filling this gap by addressing the relationship between technological change and organizational change during the Covid-19 pandemic from the perspective of companies. To examine developments and changes over the course of the pandemic, we use a survey that we conducted in Germany of 540 companies in 2021 and 605 companies in 2022. We examine how the pandemic affected technological and organizational change in administrative processes, human resources (HR), product development, sales, and production and service processes. We operationalize our main research question on the relationship between the pandemic, the implementation of digital technologies, and organizational change, with three sub-questions: 1. To what extent did the COVID pandemic lead to a boost in the digitalization of companies? 2. How and why did the focus of digitalization during the pandemic differ between companies? 3. How were technical and organizational change processes linked during the COVID pandemic? #44 The COVID-19 Crisis, Digitalization, and Organizational Change \ 6 Our study provides differentiated insights on how the pandemic affected companies, highlighting exposure to the pandemic and its impact on management awareness and acceptance by employees as important conditions that facilitated investment in digitalization measures. We disaggregate the term “digitalization” to highlight core areas of activity and the unevenness of these activities according to sectors and prior levels of digitalization. We also track the sequence of events, indicating how a gap between pioneers and laggards was followed by previously less digitalized companies catching up. Finally, our study provides evidence for the entanglement of technological and organizational changes in digitalization projects. First, we develop hypotheses on the relationship between the pandemic and digitalization, the possible reasons for the unequal exposure of companies, and the relationship between technological and organizational change, alongside a discussion of the relevant literature on these issues (Section 2). We then explain the research design and methods and provide a descriptive analysis of our sample (Section 3), before displaying the results on the relationship between the pandemic and digitalization (Section 4.1), inequalities of these developments between companies (Section 4.2) and sectors (Section 4.3), and the relationship between technological and organizational change (Section 4.4). In the discussion, we relate these findings to the hypotheses and outline the findings of our study in detail (5), which we then summarize with general conclusions on the impact of the pandemic on digitalization in companies. 2 State of research and hypotheses 2.1. The pandemic as a boost for digitalization The COVID-19 pandemic caused a global economic crisis. It disrupted global supply chains and production and service processes (Borio, 2020; Pujawan & Bah, 2022) on a scale unseen for a long time. It led to massive government intervention (also long unseen) to support businesses and households, at least in Europe and North America (Greer et al., 2021). A number of experts expected that the economic, social, and health consequences of the COVID-19 crisis would also have long-term effects and would provide a strong push for digitalization (including automation) (Amankwah-Amoah et al., 2021; Biondi, 2021; Korinek & Stiglitz, 2021; OECD, 2020). The COVID pandemic had a massive impact on companies. It broke out while economies were undergoing a socio-technical transformation known as digitalization (Brynjolfsson & McAfee, 2014). Digitalization is understood here as the establishment of networks between machines/ computers as well as the use of software systems and digital databases for monitoring, controlling, and optimizing work processes (Krzywdzinski, 2021). #44 The COVID-19 Crisis, Digitalization, and Organizational Change \ 7 Crises can accelerate or slow down processes of technological transformation in organizations. We build on the concept of crisis as “a low probability, high-impact situation that is perceived by critical stakeholders to threaten the viability of the organization” (Pearson & Clair, 1998, p. 66). As Wenzel et al. (2021) elaborate, companies can respond to crises in four ways: they can act defensively and (1) retrench their operations or even (2) exit the market; they can (3) try to persevere without adapting their products and processes; they can finally (4) respond to the crisis with innovation. Due to the scale and the specific nature of this crisis, we can assume that the preservation of many established products and processes was challenging, leaving aspects of digital innovation as the most viable alternative to retrenching operations or exiting the market. Such innovation under crisis conditions, however, requires specific conditions: knowledge and other resources as well as opportunities for new products and/or processes. The Covid-19 pandemic affected all companies and industries. As a result of the lockdowns, many companies had to find solutions for remote working, though the impact of the pandemic went beyond that. Administrative processes had to be digitalized. The restrictions also meant that traditional sales channels often collapsed and had to be digitalized. Supply chains were interrupted, creating incentives for the digitalization of supply chain management. However, the pandemic also created obstacles to digitalization. Many companies struggled with short-term financing problems, while others were overwhelmed by the task of quickly digitizing processes and products (Bellmann et al., 2021; Butollo et al., 2024). Arntz et al. (2024) show that digitalization investments during the pandemic were mainly related to remote work opportunities, while larger investment projects in digital technologies that were not directly useful for pandemic management were partly postponed. Based on the existing literature, we can formulate the first hypothesis for the analysis. It relates to the first question of the extent to which a digitalization push can be observed at all as a result of the COVID pandemic. It is assumed that the need and opportunities for digitization provided a strong incentive for change during the crisis. H1: Companies increased their digitalization investments during the COVID pandemic. 2.2. Unequal digitalization processes Research emphasizes that digitalization is a process that takes place at different speeds and depths in different countries, sectors, and also types of companies (Corrocher & Ordanini, 2002). Our second research question asks whether such differences also accounted for the digitalization push in the wake of the COVID pandemic and the reasons for such differences. Several explanations for unequal digitalization during the pandemic can be found in the literature. #44 The COVID-19 Crisis, Digitalization, and Organizational Change \ 8 We can expect investment in digitalization to be related to the immediate pressures of the pandemic, management awareness, and employee acceptance of digitalization measures. The crisis came unexpectedly, but companies were affected differently and the perception of management and employees varied (Bellmann et al., 2021; Butollo et al., 2024). H2a: Investment in digitalization during the COVID pandemic is related to the economic impact of the pandemic on the companies. H2b: Investment in digitalization during the COVID pandemic is related to the awareness of management of the need for digitalization. H2c: Investment in digitalization during the COVID pandemic is related to the acceptance of employees of the need for digitalization. Path dependencies can also be expected. It can be expected that those companies that already had experience with digitalization had better conditions for pushing digitalization further during the pandemic. Avalos et al. (2023) show that the gap between more and less digitalized companies widened during the pandemic. Abidi et al. (2023) conclude that companies with a higher degree of digitalization showed greater resilience during the crisis. H2d: Investment in digitalization during the COVID pandemic is related to the level of digitalization before the pandemic. We can also expect differences between sectors. These differences are based on the specifics of the products and processes in different sectors. Seetharaman (2020) emphasizes that the type of product and processes influenced how companies responded to the crisis. He argues that companies with products and processes with a high potential for digitalization were those which used the crisis as a boost for investing in digitalization. Rapaccini et al. (2020) argue that the major point is the potential to develop digital services based on existing products. They expect significant differences between sectors or even subsectors based on how much the companies’ products can be used to develop digital services. Ritter and Pedersen (2020) similarly emphasize that crises can lead to business model innovations. Customer behavior and demand can change significantly, forcing companies to adapt the value proposition and value demonstration of their products. This also requires companies to develop new capabilities (see also Kronblad & Envall Pregmark, 2021). Previous studies provide a partial insight into these differences. Changes to customer relations was the focus of the study by Nanda et al. (2021). The authors argue that the COVID crisis challenged the retail sector; pure brick-and-mortar retail collapsed and retailers had to rely on multi-channel retail models combining physical and online sales. Other studies have focused on the digitalization potential of processes. Bellman et al. (2021), Butollo et al. (2024), and Dyba & Di Maria (2023) showed that service sectors invested much more in digitalization during the pandemic than manufacturing sectors. They explain this by the much higher potential for digitalization of processes in service sectors. Butollo et al. (2024) showed that digitalization was particularly strong in those sectors in which communication with customers and sales could be #44 The COVID-19 Crisis, Digitalization, and Organizational Change \ 15 The following ordered logistic regression (Table 3) analyzes how different conditions affected investment in digitalization measures. Our hypothesis H2a focuses on the role of the economic impact of the pandemic, H2b on managerial awareness, and H2c on the acceptance of digitalization measures among employees. Companies that were directly hit by the effects of the pandemic showed a higher probability of increasing investments in digitalization (odds ratio 1.20; p>0.05). There was also a very strong correlation between investments and the increased level of managerial awareness of the need for digitalization as a result of the pandemic (5.88; p<0.01) and the increased acceptance of digitization measures among employees (1.53; p<0.01). Hypotheses H2a, H2b, and H2c were confirmed. Size of the company did not play a big role in the first phase of the pandemic as small and big companies were forced to react to the new challenges. Over time, however, the bigger companies showed a higher propensity to continue investments in digitalization measures. There was no robust and statistically significant relationship between the initial digitalization level of companies before the pandemic and the propensity to invest in digitalization during the pandemic (hypothesis H2d). During the first phase of the pandemic, companies with no digitalization tended to invest less in digitalization than companies with at least low, partial, or even high levels of digitalization. This can be understood as increasing polarization—the least digitalized companies were left behind. However, in 2022 the coefficients changed and companies with no and low digitalization levels showed a higher probability of investing in digitalization; this could be a sign of a catch-up process. Table 3: Higher investments in digitalization during the COVID pandemic (ordered logistic regression, odds ratios, standard errors in brackets) Independent variables 2021 2022 Economic impact of the COVID pandemic on the company 1.20 (0.10)* 1.24 (0.12)* COVID pandemic increased awareness of the need to digitalize 5.88 (0.93)** 8.51 (1.48)** COVID pandemic increased acceptance of digitalization 1.53 (0.14)** 1.54 (0.15)** Number of employees 1.14 (0.11) 1.53 (0.16)** Digitalization level before the pandemic (reference: no digitalization) Covid Covid Low digitalization 1.45 (0.73) 0.86 (0.56) Partial digitalization 2.03 (0.98) 0.67 (0.40) Strong digitalization 1.49 (0.74) 0.64 (0.39) Very strong digitalization 1.86 (1.11) 0.59 (0.36) N 469 540 Pseudo-R² 0.28 0.30 Source: Authors. Control variables: Sectors #44 The COVID-19 Crisis, Digitalization, and Organizational Change \ 16 While the COVID pandemic led to an increase in investment in some companies, in others it resulted in a halt or slowdown in digitalization processes, as companies ran into economic difficulties or had to set other priorities. This point is emphasized in particular by Arntz et al. (2024). The authors argue that a number of previously planned investment projects were halted during the pandemic. Although many companies invested in digitalization to enable remote working, this could not compensate for the halt of many other digitalization projects. The findings of Arntz et al. (2024) are compatible with ours insofar as we have no information and hence make no statements regarding the amount of investments made or halted by the companies. Figure 1 shows that there was certainly a considerable proportion of companies that stopped investment projects during the pandemic, although there are considerable sectoral differences (H2e) in the relationship between the increase in investment and the halting of digitalization projects. Our data only tells us whether projects were started and stopped, but not how large they were in each case. In some sectors, such as the automotive industry, the proportion of companies with halted projects was relatively high. This industry experienced a massive drop in demand and a disruption of supply chains, both of which impacted production and sales. Under these conditions, 43.9% of the companies surveyed in 2021 reported that digitalization projects were completely or partially stopped during the pandemic. The corresponding figures are 30.3% in logistics, 25.5% in machine building, and 25.0% in the chemical industry. The negative impact of the pandemic was lowest in financial services (23.0%) and the healthcare sector (18.4%). In 2022, very similar numbers were reported. Figure 1: Investments in digitalization and halting of digitalization measures in six sectors, 2021 0% 20% 40% 60% 80% 100% Health Financial services Chemical Automotive Logistics Machine building Investments increased: Yes Partially Projects stopped: Yes Partially Source: Authors #44 The COVID-19 Crisis, Digitalization, and Organizational Change \ 17 The sectoral differences are linked to market changes, particularly customer (demand side) expectations (Butollo et al., 2024). In the financial industry, there has long been a trend towards shifting services online. During the pandemic, many people were forced to use online financial services, changing demand behavior in the long term. In healthcare, digitalization had long suffered from a lack of resources. However, faced with the need to target pandemic measures, the German government changed its behavior and significantly increased investment in digitalization. In the chemical sector, the fact that the industry was significantly less affected by the disruptions to demand and production than the automotive and mechanical engineering sectors had a beneficial effect on investment in digitalization. Companies’ revenues did not collapse, making it easier to mobilize investments in new technologies. The automotive and mechanical engineering industries, by contrast, were hit hard by the economic collapse of the Covid-19 crisis. Demand structures did not change, but investments were partially postponed during the crisis. 4.3. Sectoral differences in major domains of digitalization during the pandemic The item “Investments in digitalization” does not yet indicate which specific digitalization projects are implemented. In addition, only some digitalization projects require major investments. The following argument therefore focuses on specific digitalization projects that were initiated or accelerated by companies during the pandemic. At the beginning of the pandemic, it was expected that there could be a surge in automation in production and services, as lockdowns seemed to reinforce the advantages of automated processes over human labor. However, as Figure 2 shows, digitalization was particularly focused on administrative processes, training, sales, and customer relations (CR), closely followed by recruiting and HR. This point also confirms the findings of the study by Arntz et al. (2024), which found an accelerated digitalization of processes that are relevant for remote work, but at the same time emphasized the postponement of Industry 4.0 investment projects. The digitalization projects launched during the pandemic can therefore be described as less capital-intensive. These focal points can be explained by the conditions of the pandemic. The need for remote work led to a pressure to convert administrative and HR processes to digital infrastructure; this was necessary for the functioning of organizations and also much easier than to automate production or service provision processes. On the other hand, the strengthening of online sales in view of the restrictions on face-to-face customer relations became a necessity for all sectors, and this was particularly pronounced in financial services. In contrast, there was considerably less activity in the areas of production, supply chain management, and product development, particularly in the first phase of the pandemic (2021). #44 The COVID-19 Crisis, Digitalization, and Organizational Change \ 18 Figure 2: Which digitalization processes were newly established or accelerated during the COVID-19 pandemic? 0% 10% 20% 30% 40% 50% 60% 70% 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 new digitalization projects started during the pandemic already running digitalization projects accelerated Administration Training Sales & CR Recruiting & HR Production or services Supply chain manag. Product development Source: Authors The picture changed somewhat over the course of the pandemic. In almost all sectors, the proportion of companies reporting new digitalization projects decreased, while the proportion of companies reporting an acceleration of ongoing digitalization projects increased very sharply. This is to be expected, as many new projects were started in direct response to the pandemic. Companies then focused on their implementation. While Figure 2 includes data from the complete survey, the same picture also emerges if we only look at those companies that participated in both waves; the proportion of companies with new digitalization projects decreased slightly from 2021 to 2022, while the proportion of companies accelerating ongoing digitalization projects increased significantly. A second change over the course of the pandemic was that projects in the areas of production, supply chain management, and product development gained in importance and caught up with projects in administration and HR. There were sector-specific developments, as Table 4 shows (hypothesis H2e). Comparing sectors, administration was among the top three focus areas in five cases (with the exception of the chemical sector). Recruiting/HR and training were also often among the top three digitalization fields. Sales was among the top three fields in chemicals, financial services, and mechanical engineering. #44 The COVID-19 Crisis, Digitalization, and Organizational Change \ 19 In the automotive industry and logistics, supply chain management was one of the top three digitalization fields. These were the industries most affected by the collapse of supply chains. While there were no changes in the focus of digitalization projects in the automotive, health, and logistics sectors over the course of the pandemic, the digitalization of training became slightly less important in the chemical sector, financial services, and machine building. On the other hand, digitalization projects in production and the provision of services moved up the priority list. Table 4: Most important areas of digitalization or automation by sector (% of companies indicating new projects or acceleration of running projects) 2021 2022 Automotive Administration (41.0%) Administration (63.2%) Supply chain management (41.0%) Recruiting and HR (57.9%) Recruiting and HR (39.5%) Supply chain management (47.4%) Chemical Sales and CR (57.8%) Administration (70.8%) Recruiting and HR (54.5%) Sales and CR (66.7%) Training (51.7%) Production/services (63.9%) Financial services Sales and CR (72.8%) Sales and CR (70.9%) Training (71.1%) Administration (67.6%) Administration (69.7%) Production/services (66.2%) Health Training (66.7%) Training (62.7%) Administration (34.1%) Administration (56.0%) Recruiting and HR (31.3%) Recruiting and HR (50.8%) Logistics Administration (48.0%) Administration (70.3%) Recruiting and HR (38.1%) Recruiting and HR (62.0%) Supply chain management (37.8%) Supply chain management (59.5%) Machine building Administration (46.3%) Administration (59.2%) Training (35.5%) Sales and CR (56.3%) Sales and CR (34.0%) Production/services (53.5%) Source: Authors #44 The COVID-19 Crisis, Digitalization, and Organizational Change \ 20 4.4. Digitalization and organizational change during the COVID pandemic The last research hypothesis relates to the connection between technical and organizational changes (H3). Our study examined the extent to which companies introduced new leadership concepts, new forms of cross-functional collaboration, and flexible working hours during the COVID-19 pandemic. Changes in all these areas were clearly correlated with each other (pairwise correlation coefficients between 0.28 and 0.55). A relatively large minority of companies introduced new measures during the pandemic. The importance of these measures also seemed to increase in the course of the pandemic. In 2021, 16% of the surveyed companies reported putting a strong emphasis on introducing new leadership concepts, 29% reported that they had introduced new measures to foster cross-functional cooperation in and across teams, and 33% that they had introduced new forms of flexible working times. In 2022, the share of companies increased to 29% in the case of new leadership concepts, 49% in the case of measures to foster cross-functional cooperation, and 43% in the case of measures to flexibilize working times. This increase could be an artefact of the changed composition of the sample in the two survey waves. However, a close look at the 120 companies which participated in both waves confirms most of the findings. In this group, the share of companies which introduced measures to foster cross-functional cooperation increased from 33% in 2021 to 44% in 2022. The increase was from 29% to 55% in the case of measures to flexibilize working times. Only the share of companies introducing new leadership concepts remained nearly stable at 20% in 2021 and 18% in 2022. The trend to introduce organizational change accelerated during the pandemic. Under what conditions did companies implement these organizational measures? There is a clear correlation between organizational measures and the investment in digitalization during the pandemic, with larger companies more likely to make organizational changes than smaller ones. In the first phase of the pandemic (2021), the direct economic impact of COVID-19 was not related to organizational measures. Companies tried to adapt their organization regardless of whether they were strongly or weakly affected by the pandemic. As Table 6 shows, this changed in 2022. In companies in which the COVID pandemic started to have lasting negative effects, the propensity to introduce organizational change decreased. As companies came under increasing economic difficulties over the course of the pandemic, they became less focused on organizational change and (we assume) more focused on short-term survival measures. #44 The COVID-19 Crisis, Digitalization, and Organizational Change \ 21 Table 6: Introduction of organizational changes due to COVID-19 pandemic Dependent variables Independent variables New leadership concepts Strengthening cross-functional cooperation Flexible working times 2021 2022 2021 2022 2021 2022 Economic impact of the COVID pandemic on the company 1.04 (0.08) 0.83 (0.07)* 1.13 (0.08) 0.84 (0.06)* 1.01 (0.08) 0.96 (0.07) COVID pandemic increased awareness of the need to digitalize 1.08 (0.16) 0.98 (0.15) 1.33 (0.18)* 1.06 (0.15) 1.11 (0.16) 0.91 (0.13) Investments in digitalization during the pandemic 1.69 (0.24)** 1.75 (0.27)** 1.50 (0.20)** 1.64 (0.25)** 1.89 (0.27)** 1.86 (0.28)** Number of employees 1.73 (0.14)** 1.87 (0.17)** 1.42 (0.11)** 2.07 (0.19)** 1.55 (0.12)** 1.92 (0.17)** N473 543 479 545 480 548 Pseudo-R² 0.08 0.06 0.06 0.08 0.09 0.07 Source: Authors. Control variables: Sector A special feature of the Covid-19 pandemic was that it occurred at the same time as other crises. Before the pandemic, geopolitical tensions between the USA, Europe, and China had increased significantly. The final phase of the pandemic also coincided with Russia’s attack on Ukraine and the resulting turbulences in world politics and global value chains. In the second wave of the survey, we asked what impact the digitalization processes triggered by the COVID-19 pandemic had had on companies’ resilience to the multi-layered crises. 27% of the surveyed companies responded that the digitalization measures introduced during the COVID-19 pandemic had made a major contribution to organizational resilience to crises, 38% saw a partial contribution, and 26% at least a small contribution to the company’s resilience. Only 9% of the surveyed companies saw no contribution at all to the company’s general resilience to crises or were unable to provide any information on this. #44 The COVID-19 Crisis, Digitalization, and Organizational Change \ 22 5 Discussion A push in digitalization Our analysis shows that the Covid 19 pandemic certainly acted as a boost to digitalization, although there were also countervailing processes. Digitalization primarily related to remote work and associated administrative and organizational processes (HR, training), while investments in automation were of rather minor importance. In some cases, digitalization projects were halted or slowed during the pandemic due to a lack of resources or a shift in management focus. Overall, the impact of the Covid 19 pandemic on investments was therefore ambivalent. However, the crisis was an event that led to a reinforcement of digitalization strategies in many companies, through new digitalization projects, higher awareness of the need for digitalization by managers, and higher acceptance of digitalization measures among employees. Hypothesis 1 was confirmed. Our analysis offers particular added value because we conducted the survey twice during the course of the pandemic and can therefore track developments in investments and digitalization projects over time. We can also rely on qualitative case study data to confirm our analysis (Butollo et al., 2024). We can show that the impact of the pandemic on new investments in digitalization was strongest in the first phase of the pandemic and then decreased. The proportion of companies that initiated new investments in digitalization decreased from 2021 to 2022, while the proportion of companies that accelerated ongoing digitalization measures increased. Attention shifted from initiating digitalization investments towards continuous implementation of measures. A majority of companies saw their resilience to crises strengthened due to these measures. Inequalities of digitalization Our research design allows us to systematically analyze the factors that influenced investments in digitalization measures, and we are able to identify the factors responsible for the differences between companies. It can be confirmed that exposure to the pandemic had a positive influence on strengthening the digitalization of companies during the pandemic. Exposure to the pandemic was strongly correlated with increasing managerial awareness of the need for digitalization and increasing employee acceptance of digitalization measures—both are strongly related to investment in digitalization during the pandemic. The influence of these variables remains constant during the course of the pandemic. Hypotheses H2a, H2b, and H2c were confirmed. #44 The COVID-19 Crisis, Digitalization, and Organizational Change \ 23 Our research offers a differentiated result with regard to the role of path dependencies and the exacerbation of inequalities between more and less digitalized companies, factors that have been highlighted in previous studies (Abidi et al., 2023; Avalos et al., 2023). Our study shows that in the first year of the pandemic, companies with a particularly low level of digitalization actually lagged behind companies that were already more digitalized. However, this ratio was reversed in the second wave of our survey. Less digitalized companies began catching up, although we do not have enough data to assess how strong this catch-up process was. We could not confirm hypothesis H2d. Finally, an important contribution of our study is in the analysis of sectoral differences. We show that the spread of mobile working forced a digitalization of processes in the administrative and HR areas across many sectors. In sectors with previously low digitalization levels (e.g., health), the need for remote work led to a strong push of digitalization measures. On the other hand, there are sector-specific focal points. In some sectors, the demands and expectations of customers changed strongly, opening the way to digitalizing sales and customer relations (e.g., financial services). Other sectors like the automotive industry and logistics were strongly hit by supply chain disruptions and invested in digitalizing supply chain management. Our analysis also shows temporal shifts in the focus of digitalization measures in some sectors. Contrary to original expectations (Biondi, 2021; Korinek & Stiglitz, 2021), there was no boost to the digitalization and automation of production and services at the beginning of the pandemic. In none of the sectors we examined was this area among the three most important areas of digitalization in 2021. However, the picture changed a year later. The digitalization and automation of production and services was now reported as one of the three most important areas, at least in machine building and financial services. One explanation is that measures to digitalize and automate work processes are costly and could not be undertaken as short-term crisis measures. Only once the necessary short-term changes to administrative processes had been mastered was it possible to focus on more far-reaching automation measures. Overall, hypothesis H2e was confirmed. Organizational change While previous research on organizational change during the Covid-19 pandemic has mainly focused on the practice of remote work, an important contribution of our analysis is to examine the relationship between digitalization measures and organizational change. We show that there is a clear correlation between investment in digitalization and increasing organizational change, although the strength of this relationship varies from sector to sector and is most pronounced in financial services, where technical change experienced a huge boost from the pandemic. #44 The COVID-19 Crisis, Digitalization, and Organizational Change \ 24 Our research design allows us to show that the proportion of companies that introduced organizational changes increased over the course of the pandemic. The most widespread changes were measures to make working hours more flexible, but as many as 15% of the surveyed companies in 2021 and 29% of the surveyed companies in 2022 stated that they were introducing measures to change management concepts to accompany digitalization measures. With our temporal perspective, we can show that while the prevalence of organizational change measures increased over the course of the pandemic, the companies most affected by the pandemic introduced fewer and fewer such measures. Management priorities shifted. On the one hand, the pandemic led to a greater awareness of the need for digitalization and organizational change in the business world. On the other hand, as the pandemic progressed, the companies that were hardest hit had to devote more and more attention to survival and less and less to organizational adjustments. Limitations One limitation of our analysis is the relatively general indicators that were available to us for organizational change. Particularly with regard to leadership concepts and practices to promote cross-functional collaboration, our study shows a need for further research—specific change practices need to be explored through in-depth analyses in sectors and companies, including qualitative studies (Butollo et al., 2024) In addition, we have no information on the level of investment. The high number of projects started during the pandemic may therefore go hand in hand with a rather restrained investment behavior overall, as found by Arntz et al. (2024). During the pandemic, companies concentrated on those projects to digitalize their processes that were absolutely necessary and feasible with the reduced resources available during the crisis.