Rebounding from disruptive events: Business recovery following the Northridge earthquake

Abstract

Although the long‐term effects of disasters and the factors that affect the ability to recover have received increasing attention from social science researchers, little systematic research has been conducted on the processes and outcomes associated with business disaster recovery. This article attempts to fill that void by exploring the determinants of recovery within the private sector. We develop a model of business recovery by drawing from existing research on disaster recovery and on organizational survival in nondisaster contexts and test it by using data collected from a stratified random sample of 1,110 Los Angeles area firms affected by the 1994 Northridge earthquake. Business size, disruption of business operations due to the earthquake, earthquake shaking intensity, and the utilization of external postdisaster aid are all predictors of business recovery. Size helps businesses weather disaster losses, just as it proves advantageous in nondisaster contexts. How businesses fare following disasters depends not only on direct physical impacts but also on how disasters subsequently affect business operations, as well as on ecological and neighborhood‐level impacts. The aid available to businesses following disasters not only does not appear to help them recover; it may actually create additional problems, such as higher debt.