Adapt, move or surrender? Manufacturing firms’ routines and dynamic capabilities on flood risk reduction in coastal cities of Indonesia

Abstract

Many manufacturing firms collocate within coastal urban areas in Indonesia. At these locations, they are severely affected by the most occurring environmental hazard, floods. Although research on firms’ adaptation to environmental hazards is burgeoning, the focus still lies on damage evaluation, support for disaster relief, or on how firms can support the community. Despite the fact that floods are a recurrent and aggravating stressor for firms, particularly in developing countries, a clear understanding of how firms develop adaptation strategies and which rationales determine their strategy has been sparsely addressed. Therefore, this paper derives flood adaptation strategies from the literature and empirically test them on flood-prone manufacturing firms in Jakarta and Semarang. Based on 67 in-depth interviews, we demonstrate that firms’ routines (i.e., behavioral pattern) and dynamic capabilities (i.e., competencies) determine the adaptation strategies of manufacturing firms in Jakarta and Semarang. The study shows that firms’ flood adaptation strategies differ regarding business size and between both cities. Particularly, it is detected that large and medium-sized firms can adapt more effectively to floods, while small firms face difficulties due to inferior routines and dynamic capabilities. This shortcoming jeopardizes their general business viability. Overall, the paper emphasizes the imperative for a deeper understanding of firms’ adaptation strategies since viable firms are an essential player to strengthen the social welfare, economic development, and ecological conservation in flood-prone areas.