Natural Disasters and Firm Resilience in Italian Industrial Districts

Abstract

We carry out a firm-level empirical analysis to evaluate the economic impact of the sequence of earthquakes occurred in 2012 in the Italian region of Emilia-Romagna, and to address the question of whether the localization of a firm within an industrial district mitigated or exacerbated this impact. We estimate the effect of the earthquake on firms' performance via two alternative methods: Difference-InDifferences and Propensity Score Matching in levels and first-differences. Our findings suggest that the earthquake reduced turnover, production, value added, and return on sales of the surviving firms, at least in the short-term. In addition, the debt over sales ratio grew significantly more in the firms located in the areas affected by the earthquake. The empirical evidence also suggests that the negative impact of the earthquake was slightly higher for the firms located in industrial districts, thereby suggesting that, at least in the short-term, the usually positive cumulative processes associated with localization within an agglomerated area could have reversed and magnified the negative impact of a disruptive exogenous supply shock.

Everything must change for us to remain the same. Resilience in the face of disruptive innovations in industrial districts

“…In the context of industrial districts (IDs), resilience is "an adaptive capability that allows a cluster to make changes to overcome internal and external disturbance and still function with its identity as a cluster" (Østergaard and Park, 2013: 4). Indeed, resilience has been used to identify and classify different evolutionary development paths (Martin and Sunley, 2011), to explain why some districts evolve while others disappear in the face of external challenges such as globalization, recession, and natural disasters (Cainelli et al, 2018;De Marchi et al, 2018).…”

The Resilience of FDI to Natural Disasters Through Industrial Linkages

“…This paper is also related to the vast body of empirical literature assessing the disaster impact on firm performance. 8 According to recent studies using micro-level data, the destruction of physical capital due to natural disasters may be a good chance of upgrading it (Leiter et al 2009;Vu and Noy 2018;Okazaki et al 2019) or a bad one of decreasing productivity and the survival rates of firms (Tanaka 2015;Cainelli et al 2018;Cole et al 2019;Meltzer et al 2021). 9 Only a limited number of empirical studies examine the nexus between natural disasters and multinationals.…”

The Resilience of FDI to Natural Disasters through Industrial Linkages

“…This paper is also related to the vast body of empirical literature assessing disaster impact on firm performance. 9 Recent studies using micro-level data have found that natural disasters destroy enormous amounts of physical capital, which may be a good chance of updating capital (Leiter et al, 2009;Vu and Noy, 2018;Okazaki et al, 2019) or a bad one of decreasing productivity and the survival rates of firms (Tanaka, 2015;Cainelli et al, 2018;Cole et al, 2019;Meltzer et al, 2021). 10 Only a limited number of empirical studies examined the nexus between natural disasters and multinationals.…”