Capability Bundles, Policy Frictions, and Sales–Liquidity Divergence in Crisis: Evidence from the World Bank Business Pulse Surveys, 2020–21

Abstract

 This study develops and tests a “continuity capability stack” that distinguishes sales recovery from financial continuity (liquidity survival). We examine which capability bundles—digital adaptation and operational reconfiguration—are associated with better outcomes, and whether public support complements these capabilities or is blunted by access frictions. We analyzed repeated cross-sectional indicator panels from the World Bank Business Pulse Surveys (2020–2021) across 45 economies, using economy–time–stratum observations by firm size and sector. Outcome coverage was 34 economies for arrears and 43 for sales. We constructed two composite indices: an Adaptation Capability Index (ACI), capturing digital platforms/online sales, remote work, operational protocols, alternative payments, and reconfiguration measures; and a Continuity Stress Index (CSI), summarizing arrears risk and sales/labor distress. Two-way fixed-effects models with lagged exposures related ACI, support access, and their interaction to arrears risk and monthly sales change. We derived resilience archetypes using unsupervised clustering on standardized capability, stress, and outcome profiles. Capability bundles were more predictive of sales recovery than of liquidity survival. Lagged ACI was positively associated with sales change (about +3.5 percentage points; 95% CI +0.8 to +6.3), whereas its association with arrears risk was not statistically distinguishable from zero. Public support access and the ACI × support interaction were not robustly associated with either endpoint in core specifications, consistent with a friction mechanism in which delivery and access constraints weaken translation of support into continuity gains. Micro and small firms experienced larger sales contractions and higher arrears risk than large firms, with sectoral heterogeneity. Clustering distinguished digitally adaptive profiles from liquidity-constrained and high-stress profiles, showing that adaptation can coexist with financial vulnerability. Digital and operational capabilities are central levers for sustaining continuity in sales but are insufficient to protect against liquidity distress. Policy design should prioritize delivery architecture, administrative simplicity, eligibility design, and disbursement speed rather than nominal support availability alone. The study introduces a continuity capability stack and a replicable capability–stress typology that separate the drivers of sales recovery from determinants of liquidity vulnerability, offering actionable insight for crisis preparedness and response design.