Analysis of post-disaster business recovery: Differences in industrial sectors and impacts of production inputs

Abstract

Understanding how disaster recovery works at the firm level is critical for maximizing a firm's recovery and reducing its overall economic losses. Therefore, this study aims to empirically investigate the business recovery process following the 2011 Great East Japan Earthquake by examining different industry sectors and the relative influencing factors. Through postal mail, a total of 1289 questionnaire responses were received from firms that were affected by the earthquake in 2011, of which 434 were finally examined after eliminating those with incomplete responses. This study applies survival analysis models to identify the impact of sector type on the post-disaster recovery process. It also establishes panel data regression models to quantitatively estimate the impact of eight production input supplies, namely electrical power supply, water supply, communication, transportation, gasoline supply, facility availability, employee attendance, and raw materials supply, on business recovery. The results suggest that the ability to recover from the earthquake varies significantly by industrial sector, with non-manufacturing sectors recovering more rapidly than manufacturing sectors. Furthermore, the availability of production inputs determines a firm's production capacity recovery. The estimated coefficients in the regression model quantitatively measure the impact of a day earlier restoration of production inputs on production capacity increasement. For example, the restoration of electricity will increase production capacity by 82.7% and 83.35% in the manufacturing and non-manufacturing sectors, respectively. The findings provide empirical evidence for business managers to develop proactive plans to mitigate business risks and for decision makers to design recovery strategies.