Discovering opportunities in necessity: the inverse creative destruction effect

Abstract

Purpose-The purpose of this paper is to investigate the changes in perceptions and actions taken on post-disaster entrepreneurial opportunities. Design/methodology/approach-Utilizing worldwide data on natural disasters (EMDAT) and entrepreneurial perceptions (Global Entrepreneurship Monitor (GEM)), the authors apply analysis of covariance to compare entrepreneurial opportunity perceptions and actions before and after a disaster took place. Findings-The study found that natural disasters have a significant and positive impact on entrepreneurial opportunity perceptions and actions but not on perceptions of self-efficacy, fear of failure and entrepreneurial intentions. Research limitations implications-One limitation of the study is the use of the secondary data. While the GEM data as well as the EMDAT data are country specific, disasters usually have a direct impact on a region of a country rather than affecting the whole country's behavior. Practical implications-The results hold important policy implications. The fact that disasters increase entrepreneurial action implies that local government institutions should include entrepreneurial action as part of the post-disaster recovery process. By providing assistance and access to resources, government institutions could further increase entrepreneurial action and could increase the number of opportunities perceived by individuals which would lead to new and innovative businesses, in addition to the rebuilding of pre-existing firms. Originality/value-Natural disasters are frequently considered to be the cause of small business failures or an obstacle to their performance, while simultaneously thought to be a vital component of post-disaster reconstruction. To date, few researchers have attempted to understand the impact of these events on entrepreneurial tendencies, behaviors and activities, even though the authors barely understand how they could serve as a source of entrepreneurial opportunity and innovation. This research is one of the first attempts to shed some light into this interesting and important phenomenon.

Natural disasters, entrepreneurship, and creation after destruction

“…This represents a 20-year trend that outpaces geophysical disasters and is not expected to decrease considering that anthropogenic climate change generates population shifts to vulnerable urban areas (Pachauri et al , 2014). As a result, increased population density and the extensional effects on supply chains (Webb et al , 2000) create a context in which the effects of disruptive events on human life and local economies will intensify (Monllor and Altay, 2016).…”

“…While it is indeed vital to understand how entrepreneurial ventures can survive natural disasters, it is also vital to formulate new conceptualizations of natural disasters as sources of innovative ideas and ventures. Before now such question has been virtually ignored (Monllor and Altay, 2016).…”

Creative ventures and the personalities that activate them in a post‐disaster setting

“…Monllor and Murphy () draw attention to the increasing incidence of natural disasters and the intensification of the associated human and financial costs, which highlights the importance of greater understanding of post‐disaster community dynamics. Relatedly, Monllor and Altay () see the unique opportunities presented as a type of ‘creative destruction’. This analysis was based on Schumpeter's () theory of creative destruction, which suggests that capitalism thrives due to the actions of entrepreneurs who destroy established structures and replace them with new, improved ideas.…”

Entrepreneurial competencies and motivations to enhance marketing innovation in Europe

“…The way entrepreneurs view themselves, their self‐confidence, the way they work, and their perceptions in general make them feel more confident when facing new challenges than when they are not facing new challenges. These factors can be analyzed separately, but some authors such as Monllor and Altay () group these factors together under the umbrella concept of self‐efficacy. In one way or another, the literature contains evidence of a clear, positive relationship between these characteristics and the intention to start a business.…”

“…Since then, scholars have shown that breaking with traditions and established policies and breaking down traditional organizational structures are actions that create a climate conducive to innovation and entrepreneurial initiative. Innovative entrepreneurs enter new markets in the wake of creative destruction, a disruptive process with transformations that, regardless of how radical they are, cause established structures to lose value (Monllor & Altay, ). Casson () reports that although this disruption is negative in the short term, in the long run, society values this kind of entrepreneurship and innovation.…”