Master of Science in Data Science and Business Analytics, University of Warsaw, Warsaw, Poland
Master of Science in International Management, Goethe University, Frankfurt, Germany
Master of Science in European Studies – EU Regional Policy, University of Wroclaw, Wroclaw, Poland
PhD Candidate, University of Szeged, Szeged, Hungary; Centre for Studies on European Economy (AIM) – Azerbaijan State University of Economics (UNEC), Baku, Azerbaijan
One of the key challenges for businesses during the Covid-19 pandemic has been to maintain financial sustainability despite the public crisis and consumer demand shocks. While some companies have managed to digitize and cope with the new realities, others have not. This will determine the future of companies and the direction of anti-crisis tools in management strategies. The purpose of this study is to analyze the use of digitalization as an anti-crisis tool among Azerbaijani businesses during the Covid-19 outbreak. The data set is based on voluntary survey data gathered from key businesses of the Azerbaijan economy. Our analysis applied k-means clustering, the related-samples Wilcoxon Signed Rank test and the independent-samples Mann-Whitney U test to learn whether there was any connection between digitalization and financial sustainability. Our findings indicate that 42% of the businesses that participated in the study obtained benefits by using digitalization as a crisis management tool during the Covid-19 pandemic period, but 38% of the respondents did not report any significant changes in their businesses despite increased digitalization efforts. Moreover, 20% of the businesses examined experienced negative changes after digitalization. The results of the independent-samples Mann-Whitney U test indicated that those businesses that had high scores before and after the increased digitalization efforts during the Covid-19 pandemic, achieved higher median profits, while the businesses with lower scores experienced a financial loss. As can be seen from the results, the chances of benefiting from digitalization are rather uncertain for local businesses. The main policy conclusion from this study is that businesses in Azerbaijan need to address the digitization challenge comprehensively to increase benefits and reduce costs. The results of our study are useful for business owners, policy makers, and top managers when developing strategies for enterprise-level digitization, especially during and after viral outbreaks.
Keywords: Azerbaijan economy, business survey, Covid-19, digitalization, dynamic capabilities.
JEL Classification: D22, D25, M15, O33.
Cite as: Gurbanov, N., Yagublu, N., Akbarli, N., & Niftiyev, I. (2022). Digitalization and the Covid-19-led public crisis management: an evaluation of financial sustainability in the Azerbaijan business sector. SocioEconomic Challenges, 6(3), 23-38. https://doi.org/10.21272/sec.6(3).23-38.2022
This work is licensed under a Creative Commons Attribution 4.0 International License
- Accenture. (2020). Driving Value and Values During COVID-19. [Google Scholar].
- Acs, Z. J., Song, A., Szerb, L., Audretsch, D. B. and Komlosi, E. (2021). The Evolution of the Global Digital Platform Economy: 1971-2021. Small Business Economics, Springer, 57(4), 1629–1659. [CrossRef].
- ADB – Asian Development Bank (2014). Private Sector Assesment (Summary). Country Partnership Strategy: Azerbaijan, 2014–2018. [Google Scholar].
- Ahmadova, E., Hamidova, L. and Hajiyeva, L. (2021). Diversification of the Economy in the Context of Globalization (Case of Azerbaijan). In SHS Web of Conferences, 92. [CrossRef].
- Barney, J. B. (1986). Organizational Culture: Can it be a Source of Sustained Competitive Advantage? Academy of Management Review, 11(3), 656–665. [CorssRef].
- Barney, J. B. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, 17(1), 99–120. [CrossRef].
- Barua, S. (2020). Understanding Coronanomics: The Economic Implications of the Coronavirus (COVID-19) Pandemic. SSRN Electronic Journal. [CrossRef].
- Bason, C. (2010). Use Co-creation to Drive Public Sector Innovation. [Google Scholar].
- Bauer, R., Derwall, J. and Otten, R. (2006). The Ethical Mutual Fund Performance Debate: New Evidence from Canada. Journal of Business Ethics, 70(2), 111–124. [CrossRef].
- BBC – British Broadcasting Corporation. (2022). The Visual and Data Journalism Team. Covid map: Coronavirus Cases, Deaths, Vaccinations by Country. [Google Scholar].
- Belitski, M., Guenther, C., Kritikos, A. S. and Thurik, R. (2022). Economic Effects of the COVID-19 Pandemic on Entrepreneurship and Small Businesses. Small Business Economics, 58(2), 593–609. [CrossRef].
- Besson, P. and Rowe, F. (2012). Strategizing Information Systems-Enabled Organizational Transformation: A Transdisciplinary Review and New Directions. Journal of Strategic Information Systems, 21(2), 103–124. [CrossRef].
- Bharadwaj, A., El Sawy, O. A., Pavlou, P. A., … and Venkatraman, N. (2013). Digital Business Strategy: Toward a Next Generation of Insights. MIS Quarterly, 37(2), 471–482. [CrossRef].
- Bholowalia, P. and Kumar, A. (2014). EBK-Means: A Clustering Technique Based on Elbow Method and k-Means in WSN. International Journal of Computer Applications, 105(9), 17–24. [Google Scholar].
- Binti, S. Z. and Ismail, M. (2019). The Concept of Theory of Dynamic Capabilities in a Changing Environment. International Journal of Academic Research in Business and Social Sciences, 9(6), 1071–1078. [CrossRef].
- Bundy, J., Pfarrer, M. D., Short, C. E. and Coombs, W. T. (2016). Crises and Crisis Management: Integration, Interpretation, and Research Development. Journal of Management, 43(6), 1661–1692. [CrossRef].
- Coombs, W. T. (1999). Ongoing Crisis Communication: Planning, Managing and Responding. Thousand Oaks, CA: Sage.
- Coombs, W. T. (2007). Protecting Organization Reputations During a Crisis: The Development and Application of Situational Crisis Communication Theory. Corporate Reputation Review, 10(3), 163–176. [CrossRef].
- Coombs, W. T. (2015). Ongoing Crisis Communication, 4thedn. Thousand Oaks, CA: Sage.
- Czech, K. (2018). Oil Dependence of Post-Soviet Countries in the Caspian Sea Region: The Case of Azerbaijan and Kazakhstan. Acta Scientiarum Polonorum. Oeconomia, 17(3), 5–12. [CrossRef].
- Darling, J., Hannu, O. and Raimo, N. (1996). Crisis management in international business: A case situation in decision making concerning trade with Russia. The Finnish Journal of Business Economics, 4, 12–25.
- Day, G. S. and Schoemaker, P. J. (2016). Adapting to fast-changing markets and technologies. California Management Review, 58(4), 59–77. [CorssRef].
- Derrick, B. T. (2021). A Timeline of the Coronavirus Pandemic. The New York Times. [Google Scholar].
- Eisenhardt, K. M. and Martin, J. A. (2000). Dynamic capabilities: what are they? Strategic management journal, 21(10‐11), 1105–1121. [Google Scholar].
- Fairlie, R. and Fossen, F. M. (2021). The early impacts of the COVID-19 pandemic. Small Business Economics, 1–12. [CrossRef].
- Fitzgerald, M., Kruschwitz, N., Bonnet, D. and Welch, M. (2014). Embracing digital technology – a new strategic imperative. MIT Sloan Management Review, 55(2), 1–12.
- Fuglsang, L. (2008). Capturing the benefits of open innovation in public innovation: A case study. International Journal of Services Technology and Management, 9(3-4), 234–248. [CrossRef].
- Gabryelczyk, R. (2020). Has COVID-19 Accelerated Digital Transformation? Initial Lessons Learned for Public Administrations. Information Systems Management, 37(4), 303–309. [CrossRef].
- Gobble, M. M. (2018). Digital Strategy and Digital Transformation, Research-Technology Management, 61(5), 66–71. [CrossRef].
- Goodwin, T. (2015) The Battle is for the Customer Interface. TechCrunch. [Google Scholar]
- Guo, H., Yang, Z., Huang, R. and Guo, A. (2020). The Digitalization and Public Crisis Responses of Small and Medium Enterprises: Implications from a COVID-19 Survey. Frontiers of Business Research in China, 14(1), 1–25. [CrossRef].
- Hamidova, L. (2018). Diversification of The Economy of Azerbaijan: How to Overcome Resource Dependence? Economics and Management, Faculty of Economics, South-West University “Neofit Rilski”, Blagoevgrad, 14(1). 2–13. [Google Scholar].
- He, H. and Harris, L. (2020). The Impact of Covid-19 Pandemic on Corporate Social Responsibility and Marketing Philosophy. Journal of Business Research, 116, 176–182. [CrossRef].
- Heath, R. L. (2005). Issues Management. In R. L. Heath (Ed.), The Encyclopedia of Public Relations (pp. 460–463). Thousand Oaks, CA: Sage
- Henriette, E., Mondher, F. and I. Boughzala, I. (2015). The Shape of Digital Transformation: A Systematic Literature Review. In Ninth Mediterranean Conference on Information Systems (MCIS), Samos, 3–5 October 2015.
- Hillyard, M. J. (2000). Public Crisis Management: How and Why Organizations Work Together to Solve Societies Most Threatening Problems. Writers Club Press: Lincoln, NE.
- Hung, R. Y. Y., Yang, B., Lien, B. Y. H., McLean, G. N. and Kuo, Y. M. (2010). Dynamic capability: Impact of process alignment and organizational learning culture on performance. Journal of World Business, 45(3). 285–294. [CrossRef].
- IMF – International Monetary Fund (2010). Republic of Azerbaijan: 2010 Article IV Consultation: Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Azerbaijan, 113. [Google Scholar].
- IMF – International Monetary Fund (2021). IMF Executive Board Concludes 2021 Article IV Consultation with the Republic of Azerbaijan. [Google Scholar].
- Jagjit, S. S. and Harri L. (2019). Developing design principles for the digitalisation of purchasing and supply management, Journal of Purchasing and Supply Management, 25(1), 78–98. [Google Scholar].
- James, E. H., Wooten, L. P. and Dushek, K. (2011). Crisis Management: Informing a New Leadership Research Agenda. Academy of Management Annals, 5(1), 455–493. [CrossRef].
- Jaworski, B., Kohli, A. K. and Sahay, A. (2000). Market-driven versus driving markets. Journal of the academy of marketing science, 28(1), 45–54. [CrossRef].
- Kearins, K. (2017). Corporate social responsibility: The Good, the Bad and the Ugly. Society & Business Review, 34(2), 51–79.
- Kent, M. L. (2010). What is a Public Relations “Crisis?” Refocusing Crisis Research. The Handbook of Crisis Communication, 705–712. [CrossRef].
- Koch, P. and Hauknes, J. (2005). On Innovation in the Public Sector–Today and Beyond.
- Kouzmin, A. (2008). Crisis Management in Crisis? Administrative Theory & Praxis, 30(2), 155–183. [CrossRef].
- Laerd Statistics (2015a). Wilcoxon Signed-Rank Test Using SPSS Statistics. Statistical tutorials and software guides. [Link].
- Laerd Statistics (2015b). Mann-Whitney U Test Using SPSS Statistics. Statistical tutorials and software guides. [Link].
- Li, J., Merenda, M. and Venkatachalam, A. (2009). Business Process Digitalization and New Product Development: An Empirical Study of Small and Medium-Sized Manufacturers. IJEBR, 5(1), 49–64. [CrossRef].
- Linnenluecke, M. K. and McKnight, B. (2017). Community Resilience to Natural Disasters: The Role of Disaster Entrepreneurship. Journal of Enterprising Communities: People and Places in the Global Economy, 11(1), 166–185. [CrossRef].
- Manafov, G. N. and Sadigov, N. A. (2021). Problems of Digital Entrepreneurship Development in Azerbaijan, Economic and Social Development. In 70th International Scientific Conference on Economic and Social Development Development, (Eds.) Yagubov, S., Aliyev, S. and Mikic, M., 66–665.
- McCormick, J., Doty, C.A., Sridharan, S., Curran, R., Evelson, B., Hopkins, B., Little, C. Leganza, G., Purcell, B. and Miller, E. (2016), “Predictions 2017: Artificial Intelligence Will Drive the Insights Revolution”, FORRESTER Research for Customer Insights Professionals. [Google Scholar].
- Miethlich, B., Belotserkovich, D., Abasova, S., Zatsarinnaya, Е. and Veselitsky, O. (2020). Digital Economy and its Influence on Competitiveness of Countries and Regions. Revista Espacios, 41(12). [Google Scholar].
- Mukhtarov, S., Mammadov, J. and Ahmadov, F. (2019). The Impact of Oil Prices on Inflation: The case of Azerbaijan. International Journal of Energy Economics and Policy, 9(4). 97–102. [CrossRef].
- Müller, R. (1985). Corporate crisis management. Long Range Planning, 18(5), 38–48. [CrossRef].
- OECD – Organisation for Economic Co-operation and Development. (2020). The Impact of Big Data and Artificial Intelligence (AI) in the Insurance Sector. [Link].
- OECD – Organisation for Economic Co-operation and Development. (2020), Digital Transformation in the Age of COVID-19: Building Resilience and Bridging Divides, Digital Economy Outlook 2020 Supplement. [Google Scholar].
- Pacheco, E. R. (2015). Unsupervised Learning with R. Packt Publishing Ltd.
- Pearson, C. M. and Clair, J. A. (1998). Reframing Crisis Management. Academy of Management Review, 23(1), 59–76. [CrossRef].
- Penrose, E. T. (1959). The Theory of the Growth of the Firm. Oxford University Press. [Google Scholar].
- Priem, R. L. and Butler, J. E. (2001). Is the Resource-Based “View” a Useful Perspective for Strategic Management Research? Academy of Management Review, 26(1), 22–40. [CrossRef].
- Rahimli, N. and Nazirov, M. (2020). Impact of Oil Price On Azerbaijan Economy: Relationship Between Oil Prices, Real Effective Exchange Rates and Real GDP. ASERC Journal of Socio-Economics Studies, 3(1), 37–45. [Google Scholar].
- Rahimova, V. (2020). Organizing Production Innovation in Azerbaijan and Researching Modern Development Trends, In 55th International Scientific Conference on Economic and Social Development, (Eds.) Ismayilov, A., Aliyev, K. and Benazic, M., 158–166. [Google Scholar].
- Ramelli, S. and Wagner, A. F. (2020). Feverish Stock Price Reactions to COVID-19. The Review of Corporate Finance Studies, 9(3), 622–655. [CrossRef].
- Regester, M. and Larkin, J. (2008). Risk Issues and Crisis Management in Public Relations: A Casebook of Best Practice. Kogan Page Publishers: London.
- Richter, A. (2020). Locked-down Digital Work. International Journal of Information Management, 55, 102–157. [CrossRef].
- Robey, D. and Sahay, S. (1996). Transforming Work Through Information Technology: A Comparative Case Study of Geographic Information Systems in County Government. Information Systems Research, 7(1), 93–110. [Google Scholar].
- Rovshan, A. (2020). Pandemic 2020: Key Outcomes for Azerbaijan’s Economy. Baku Research Institute. [Google Scholar].
- Sebastian, I., Ross, J., Beath, C., Mocker, M., Moloney, K. and Fonstad, N. (2017). How Big Old Companies Navigate Digital Transformation. MIS Quarterly, 16(3), 197–213. [Google Scholar].
- Smart, C. and Vertinsky, I. (1984). Strategy and the Environment: A Study of Corporate Responses to Crises. Strategic Management Journal, 5(3), 199–213. [CrossRef].
- Suleymanov, E. and Abdullayeva, F. (2021). Azerbaijan Economy in During Covid-19 Pandemic. InterConf, 59–65. [Google Scholar].
- Teece, D. J. (2007). Explicating Dynamic Capabilities: The Nature and Microfoundations of (Sustainable) Enterprise Performance. Strategic management journal, 28(13), 1319–1350. [CrossRef].
- Touchtidou, S. (2015). Evaluation of the Competitiveness and the Business Environment of Azerbaijan. [CrossRef].
- UN – Nited Nations (2021). UN report: Pandemic Year Marked by a Spike in World Hunger. World Health Organization. [Link].
- Valiyev, A. and Valehli, F. (2021). COVID-19 and Azerbaijan: Is the System Resilient Enough to Withstand the Perfect Storm? Problems of Post-Communism, 69(1), 1–12.
- Valiyeva, I. (2020). Impact of E-Government Services on Business Environment Development in Azerbaijan. Economic and Social Development: Book of Proceedings, 2–4, 1–5. [Google Scholar].
- Venkatraman, N. (1994). IT-Enabled Business Transformation from Automation to Business Scope Redefinition. Sloan Management Review, 35, 73–87. [Google Scholar].
- Vial, G. (2019). Understanding Digital Transformation: A Review and a Research Agenda. The Journal of Strategic Information Systems, 28(2), 118–144. [CrossRef].
- Wang, C. L. and Ahmed, P. K. (2007). Dynamic Capabilities: A review and Research Agenda. International journal of management reviews, 9(1), 31-51. [CrossRef].
- Warner, K. S. and Wäger, M. (2019). Building Dynamic Capabilities for Digital Transformation: an Ongoing Process of Strategic Renewal. Long Range Planning, 52(3), 326–349. [CrossRef].
- Wernerfelt, B. (1989). From Critical Resources to Corporate Strategy. Journal of General Management, 14, 4–12. [CrossRef].
- Yoo, Y., Henfridsson, O. and Lyytinen, K. (2010). Research Commentary—The New Organizing Logic of Digital Innovation: An Agenda for Information Systems Research. Information Systems Research, 21(4), 724–735. [CrossRef].
- Ziyadin, S., Suieubayeva, S. and Utegenova, A. (2020) Digital Transformation in Business. In: Digital Age: Chances, Challenges and Future. Lecture Notes in Networks and Systems, 84, 408–415. [CrossRef].
- Zollo, M. and Winter, S. G. (2002). Deliberate Learning and the Evolution of Dynamic Capabilities. Organization Science, 13(3), 339–351. [CrossRef].
- Zott, C. (2003). Dynamic Capabilities and the Emergence of Intra Industry Differential Firm Performance: Insights from a Simulation Study. Strategic Management Journal, 24(2), 97–125. [CrossRef].
- Zuboff, S. (1985). Automate/informate: The Two Faces of Intelligent Technology. Organizational Dynamics, 14(2), 5–18. [Google Scholar].