Discovering opportunities in necessity: the inverse creative destruction effect

The purpose of this paper is to investigate the changes in perceptions and actions taken on post-disaster entrepreneurial opportunities.

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.

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.

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.

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.

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.