Using cross-country and German administrative data on robotization, we show that the impact of robots on firms and labor markets is limited. First, investment in robots is small and highly concentrated in a few industries, representing less than 0.3% of aggregate expenditures on equipment. Second, robotization does not grow as rapidly as Information Technology did in the past, and current growth is driven by gains in developing countries. Third, firms invest in robots when they face difficulties in finding workers and subsequently increase employment after the investment. The total employment effect in exposed industries and regions is negative but modest in magnitude. We discuss why the effects of robots are limited and demonstrate that other digital technologies have more potential for large economic impact.

We study how firms respond to an unexpected demand shock, exploiting the 2006 boycott of Danish products after publication of Muhammad caricatures. On average, affected firms lose the majority of their exports to Muslim countries and experience a significant decrease in total sales. However, firms with low financial leverage redirect sales to new and existing product-destination markets in non-Muslim countries, which allows them to fully offset their losses. In contrast, high-leverage firms do not enter new markets and instead actively downsize. Our results highlight the importance of financial flexibility in times of crisis, consistent with declarations of practitioners.