Abstract
Political shocks create uncertainty for firms in international markets. We know that digitalisation has reshaped cross-border exchange, but we have limited firm-level evidence on how digital channels react when institutional stability becomes uncertain. We use the 2016 Brexit referendum as an institutional shock and analyse firm-level digital sales intensity using UK Office for National Statistics panel data from 2012 to 2019 in a difference-in-differences event-study framework. We show that firms with pre-existing EU-oriented digital sales reduced their digital sales intensity after the referendum. The decline is stronger for goods-producing firms compared to service firms, and more pronounced for firms with higher B2B orientation than for those focused on B2C markets. These results indicate that digitalization does not operate independently from governance conditions. They suggest that maintaining stable digital governance frameworks may be as important as promoting digital capability when designing international business policy.