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New Research Definitively Links Digital Tools to More Revenue and Hiring for Small Businesses During Pandemic
COMMENTARY

March 17, 2021by David Audretsch
A view of Bishop, Calif., on May 7, 2020. Small-business owners along the U.S. 395 corridor are dealing with closures and pondering what happens next as California eases restrictions.(Brian van der Brug/Los Angeles Times/TNS)

As Congress continues its investigation into large technology companies, the critically important role digital tools and services play for small businesses is once again being overlooked. Before Congress, regulators, or Attorneys General take any action that changes the way the digital ecosystem operates, they must stop and ask how their actions will impact small business resiliency and their ability to cope with crises like COVID-19. 

It is no secret that this pandemic has devastated small businesses. However, new research from Greenberg and the Connected Commerce Council, the first to examine small business data from a full year of the pandemic, uncovered a critical silver lining – the Digital Safety Net provides small businesses with resilience. Free and low-cost Digital Safety Net tools, including online marketplaces, digital advertising, social media, e-commerce, and back-office tools, do not just insulate small businesses against the adverse impacts of the crisis; they also equip them with a competitive advantage to propel them to prosperity in the coming post-pandemic era. 

The research surveyed more than 2,000 small businesses nationwide and documents how small businesses that intensively adopted digital tools pre-pandemic, including online advertising, social media, financial and organizational software, and online marketplaces, reported only half the revenue loss and hired new employees at almost twice the rate of digitally uncertain businesses during COVID-19. Digitally advanced businesses reported a 12% drop in revenue compared to 23% for the digitally uncertain. Digital-adopter businesses are not just surviving; they are thriving and will be much better prepared for the coming post-pandemic era and the next crisis. 

Also, 59% of small businesses reported that digital tools are more helpful to them now than before the start of the lockdowns and restrictions caused by COVID-19. The value of digital tools and platforms to the small business economy is real. Their ability to help small businesses survive economic downturns and emerge stronger than businesses that do not embrace technology is irrefutable.

However, an alarming discovery can also be deduced from the study; the new small business digital divide. The chasm between small business digital haves and have nots that this study surfaces should concern everyone. State and federal governments, small business advocates, and technology companies should prioritize education and training resources for small businesses, so more can take advantage of the digital opportunity and build successful, sustainable businesses. The benefits of national and global markets, online advertising, and digital marketing can only help small businesses if they are aware of affordable small business services and have the skills to use them effectively. 

Investments in broadband infrastructure are also critical. According to the Federal Communications Commission, 21 million Americans currently lack broadband access. That is millions of consumers and many thousands of businesses without a fundamental life and business tool. It is impossible to take a business online, embrace e-commerce and discover all the digital opportunities without adequate internet access. 

The past year has been one of digital adoption and opportunity for so many small businesses, and this new research shows how grand that opportunity can be. But for small businesses that are still struggling, it is never too late to get started and integrate digital tools into their business. And it is never too late for elected officials and technology companies to prioritize the small business Digital Safety Net.


David Audretsch is a Distinguished Professor and economist at Indiana University’s O’Neill School of Public and Environmental Affairs and is Editor-in-Chief of Small Business Economics.

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