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Predicting long-term business recovery four years after Hurricane Katrina

Elizabeth Ann Dietch and Christy M. Corey
Department of Management, University of New Orleans, New Orleans, Louisiana, USA
Abstract
Purpose This study is an empirical examination of the ongoing recovery efforts of surviving businesses in the greater New Orleans area four years after Hurricane Katrina. Factors thought to contribute to long-term recovery were examined including internal factors (e.g. organizational size), population-related issues (e.g. loss of customer base), and macro variables (e.g. neighborhood recovery). Problems with population issues were expected to be a primary cause of slow business recovery. The paper aims to discuss these issues. Design/methodology/approach Managers from 186 businesses in the New Orleans area participated in the study by completing a survey. Eligible business needed to exist before Hurricane Katrina and still be operating at the time of data collection which occurred in Spring 2009. Findings Results from analysis of variance indicated that managers from organizations performing worse compared to pre-Katrina levels reported signicantly greater problems across the internal, population-related and macro variables. In regression analysis, only three factors within the population and macro variable areas were signicant predictors of organizational performance. As expected, organizational performance was strongly predicted by population-related issues, especially the loss of customers. Research limitations/implications One limitation concerns the cross-sectional design of the study which focused specically on surviving businesses. The survivor bias in the data limits the generalizability of the results. Also, observations from businesses in the same neighborhood could be spatially dependent due to the systematic inuence of external factors. Originality/value This study provides a rare investigation of long-term business recovery, at the organizational level of analysis, in the wake of a disaster that resulted in one of the most extreme population dislocations in US history. Keywords Organizations, Natural disasters, United States of America Paper type Research paper

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On August 29, 2005, Hurricane Katrina made landfall in Southeast Louisiana. It caused major destruction all along the Gulf Coast, and levee failures in New Orleans resulted in massive ooding of the city. The hurricane resulted in the greatest population dislocation in US history, with an estimated one million residents displaced (Institute for Southern Studies (ISS), 2009). Most of the population of New Orleans was prevented from returning to the city for a month after the storm, as Hurricane Rita followed closely after Katrina, ooding the city a second time. Four years after this disaster, the population in the greater New Orleans (GNO) area had recovered to about 88 percent of its pre-Katrina level of 1.2 million residents (United States Census Bureau, 2009). However, the population within the city limits of New Orleans had only recovered to 74 percent of pre-Katrina levels, and many displaced New Orleans residents who wished to return still were not able to do so. An estimated 107,000 businesses in Louisiana

Management Research Review Vol. 34 No. 3, 2011 pp. 311-324 q Emerald Group Publishing Limited 2040-8269 DOI 10.1108/01409171111116321

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were impacted by the hurricane ( Jarmin and Miranda, 2009), and have had to struggle to rebuild. Nonetheless, the New Orleans area is recovering, rebuilding infrastructure and re-establishing residential and business communities. This paper examines the factors that are contributing to or impeding the continuing long-term recovery of surviving businesses in the New Orleans area. Business survival is an extremely important part of community recovery after a natural disaster, providing jobs, good and services, and tax dollars (Cochrane, 1992). However, there is little research on what features are most vital to that survival at an organizational level. What research has focused on businesses has often been at a very aggregated level (Cohen, 1993; Eguchi et al., 1998; West and Lenze, 1994; see also Ewing et al. (2010) and Thompson (2009) for a discussion of the measurement of regional economic impact). These regional-level investigations provide little guidance about what makes the difference for individual businesses that recover easily and those that struggle. A few studies have tried to examine factors that determine the success of recovery for individual businesses post-disaster, but results have been inconsistent regarding what matters most. For example, Chang and Falit-Baiamonte (2003) found business sector, size, and building occupancy tenure were the best indicators of business vulnerability after the 2001 Nisqually earthquake. In contrast, Tierney (1997) found that the length of disruption to operations, size of the business, and general economic decline in the area were most predictive of success after the Northridge earthquake. Webb et al. (2002) found different factors predicted successful recovery in Miami after Hurricane Andrew compared to Santa Cruz after the Loma Prieta earthquake. The inconsistencies in these ndings highlight differences in impacts of different disasters; an earthquake will not cause precisely the same problems as a hurricane. Disasters differ in terms of how widespread the damage was, how long lifelines were disrupted, how many people were displaced, and so forth. Differences in disaster recovery research conclusions likely also depend on how long after the natural disaster measurement took place. The features that matter most in the immediate aftermath of a disaster are likely not the same as those that sustain long-term recovery. We examined the ongoing recovery efforts of businesses in the GNO area three to four years after Hurricane Katrina. Thus, we are assessing factors contributing to long-term recovery. All the businesses studied here have survived the immediate aftermath of Katrina, have xed the majority of their physical damage, and remained in business for nearly four years post-Katrina. As we are only examining businesses that had re-opened after Katrina, this study does not address factors in the ability to re-open at all after a natural disaster. Lam et al. (2009) provide a useful examination of re-opening rates at various time points after Hurricane Katrina. They found that although there was a steady increase in re-opened businesses over time, progressing from 25 percent four months post-Katrina to 65 percent two years later, some businesses never did return to the New Orleans area. In this study, despite that fact that all the businesses we surveyed had at least survived, some businesses are denitely performing better than others. The primary purpose of this study is to determine what factors are making a difference in the degree of recovery success at this point, four years down the road. In order to provide a comprehensive examination of all possible factors affecting business recovery in a post-disaster area, we examined variables in the following four categories: industry sector, internal business features, population issues, and other macro level variables.

Industry sector Several studies have found that some industries are more resistant to disaster, and may actually prot from it. It makes sense that construction and manufacturing businesses could realize gains post-disaster, as rebuilding efforts require their labor, materials, and expertise (Zhang et al., 2009). Dahlhamer and Tierney (1998) did nd that the largest proportion of recovered businesses after the Northridge earthquake were in the manufacturing and construction sectors, and Kroll et al. (1990) found a similar result in Oakland and Santa Cruz after the Loma Prieta earthquake. Hurricane Andrew also resulted in increased demand for building contractors in the Miami area, even as tourism as retail industries suffered substantial losses (Cole et al., 2005). Other studies have also found that wholesale and retail businesses generally report loss of customers and sales following disaster, and have a more difcult time regaining pre-disaster performance levels (Boarnet, 1998; Chang and Falit-Baiamonte, 2003; Kroll et al., 1990; Webb et al., 2002). However, there is not a clear indication as to whether businesses in services industries should fare better or worse; previous studies suggest they may simply hold their ground, without either much increase or decrease in business (Webb et al., 2002). We expected a similar pattern of recovery to persist in the New Orleans area, even though more long-term recovery was being examined: H1. Relative to pre-Katrina levels of performance, construction/manufacturing rms will be performing better, and retail rms will be performing worse, four years after the storm, with service industries reporting intermediate levels of recovery. Internal factors We examined four features of organizations internal operations that may impact long-term performance: organizational size, supply-line problems, sufciency of capital and the perceived quality of managerial decision making. Regarding size, several studies have found that larger organizations are better able to withstand disasters than smaller businesses (Chang and Falit-Baiamonte, 2003; Kroll et al., 1990; Tierney, 1997). Larger businesses are likely to have more of a cushion in terms of employees and capital (Whitney et al., 2001). Zhang et al. (2009) point out that larger rms are more likely to have multiple locations, be located in newer facilities, have more nancial and political capital, and be better able to afford insurance for disaster recovery. We thus expected an overall advantage of larger size, in terms of an organizations number of employees in the GNO area. Available capital is also likely to be an important potential feature in business recovery, as investments in rebuilding and learning how to thrive in a changed local landscape are necessary to survive. Some studies have suggested that businesses with very little liquid capital often struggle after a disaster (Tierney, 1997; Webb et al., 2002). Thus, it was anticipated that those businesses that are still struggling to recover would be more likely to report problems with insufcient capital. We also examined supply problems. Even businesses that have successfully weathered disaster may suffer due to the failure of their suppliers or difculties transporting supplies where needed. Consequently, failing suppliers can cause a domino effect to other businesses (Zhang et al., 2009). Although most businesses might be expected to have solved supply problems by the time this data were collected, they may have been unable to achieve as optimal arrangements as they had before the storm. Furthermore, some suppliers

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that struggled to remain open right after Katrina may have since collapsed, leading to persistent or newly-developing supply problems for businesses downstream. Finally, we considered one aspect to recovery that does not appear to be assessed in previous research. Webb et al. (2000) suggested that future research should consider the decision-making processes of business owners and managers, pointing out that some make sounder post-disaster decisions than others. Runyan (2006) noted that Gulf Shore business owners had to make a great many decisions in a short amount of time in order to re-open after the disaster. Sustained recovery will depend on management making appropriate short- and long-term decisions regarding how to operate in a changed landscape. Zolin and Kropp (2007) reported that the surviving businesses in the Katrina-impacted are reported that their recovery experience was quite similar to an approach to starting up a new business, as they newly assessed the changed external environment and planned fresh strategy in response. Thus, some interviewees reported that their business a quarter into the recovery was quite different than prior to Katrina. Zolin and Kropp point out that those businesses that survive may be more likely to have an entrepreneurial orientation, making this sort of fresh start and responsiveness to the altered business environment a more likely possibility. Therefore, we included managerial decision making as a possible contributing factor to recovery: H2. Businesses that are larger, have sufcient liquid capital, are experiencing fewer supply problems, and have engaged in effective managerial decision making will exhibit better organizational performance, relative to pre-Katrina levels. Population-related issues A distinguishing feature of Hurricane Katrina was the astoundingly huge amount of population dislocation it created. Although our data were collected in Spring 2009, population levels in the area still had not recovered to pre-Katrina levels (United States Census Bureau, 2009). Population decrements cause problems for businesses in two ways. The rst is the role of the local population as a valuable labor source. When populations are displaced, area businesses may lose existing employees and have difculty recruiting new hires (Zhang et al., 2009). The local population is also a critical source of customers. So customer loss after dislocation may be a major contributing factor to business failure post-disaster (Tierney, 1997). An examination of factors contributing to New Orleans business recovery within the rst year following Hurricane Katrina showed that population-related issues presented the most inuential obstacles hindering recovery (Corey and Deitch, n.d.). Although the variable labor shortages was a signicant predictor of organizational performance, Corey and Deitch (n.d.) found that problems associated with a loss of customer base showed the strongest inverse relationship with performance. Given that, four years after Hurricane Katrina, current population estimates for the New Orleans metro area continue to fall short of their pre-Katrina levels, we expect that population-related variables will remain the most important predictors of organizational performance: H3. Businesses that report greater customer loss and labor shortages will show more decrements in organizational performance, relative to pre-Katrina levels. These population-related factors will have the greatest impact on organizational performance.

Macro variables What happens beyond the organization itself will have a large impact on an organizations functioning. The level of damage and recovery of the neighborhood surrounding the business may be more important than the damage sustained by the business itself (Tierney, 1997). We also assessed perceptions of government response and aid, both at the state/local level and the federal level, as government responses to disaster in the form of community aid and business loans impact the recovery of businesses and neighborhoods (Zhang et al., 2009). We also included this variable because the post-Katrina response from government agencies such as Federal Emergency Management Agency (FEMA) and the Small Business Administration (SBA) has been roundly criticized (Runyan, 2006). Finally, the declining economic situation of the USA as a whole has been impacting businesses all over the nation at this time. So, we also considered how much the depressed national economy might be contributing to local business success or failure: H4. Businesses that are performing worse four years after Hurricane Katrina will be more likely to assess government aid as inadequate, to report negative impacts of the overall national economy, and to be situated in neighborhoods that are slower to recover. Assessing organizational performance The outcome variable of interest in this study is organizational performance. Clearly, businesses included in this investigation have overcome the biggest obstacle, long-term survival in a post-disaster economy. However, organizational performance is not simply conceptualized as current revenue levels, since the important issue in assessing recovery is performance relative to that prior to Hurricane Katrina. Organizations may be categorized into winners and losers, with some performing better and others doing worse (while some merely hold steady) compared to their pre-Katrina levels. Additionally, one can also attempt to quantify the amount of performance changes, in terms of the percentage of gain or loss in revenue relative to pre-Katrina levels. We examined both types of performance measures in our tests of hypotheses. Method Sample Managers from 186 businesses in the GNO area participated in the study by completing a survey; they were recruited via e-mail, by telephone, and in person using convenience sampling methodology. To be eligible, businesses had to be situated in one of the ve parishes comprising the GNO area: Orleans, Jefferson, St Bernard, St Tammany, or Plaquemines. The business also needed to exist before Hurricane Katrina and still be operating at the time of data collection. Finally, managers needed to be familiar with the history of the organization during the specied time period in order to complete the survey. Data were collected in the Fall of 2008 and Spring of 2009, between three and four years post-Katrina. Measures Business sector. Respondents were asked to describe the goods or services they provide; these were then sorted into three categories: construction/manufacturing, retail/wholesale trade, or service industry. Surveys from businesses that did not fall into one of these categories (e.g. from government agencies) were not used in the study.

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Dummy codes with services as the reference category were used for this variable in regression. Internal variables. A total of four internal variables were measured. Organizational size was assessed using the number of staff reported in the GNO area. Then respondents were asked to what extent the following issues were causing difculties in their post-Katrina recovery: problems with suppliers, insufcient capital, and poor managerial decision making. These variables, in addition to the population and macro variables described below, were rated on a ve-point summated rating scale ranging from 1 not a problem to 5 very problematic. Population variables. Two population impact items were used. Respondents indicated the extent to which loss of their customer base was still causing problems with post-Katrina recovery. In addition, respondents rated the degree to which labor shortages were hindering business recovery. Macro variables. Respondents were asked to what extent problems were caused by four macro variables: slow recovery in the neighborhood of the business, slow progress by state and local government, lack of assistance from the Federal Government, and the declining national economy. Performance. Organizational performance was operationalized as both a categorical and continuous variable. First, managers indicated whether performance was better, worse, or the same compared to pre-Katrina performance. This information was used as a categorical variable representing the performance status of the business. Next, managers estimated the percentage of the increase or decrease in business since Katrina. Those reporting no performance change scored as 0. This percentage increase/decrease was used as the continuous dependent variable for regression analyses. Results Although all businesses in the sample had survived at least three years post-Katrina, there was variation in their reported success. A total of 90 business owners and managers (48.4 percent) reported that their business was performing at the same level as pre-Katrina. The remaining businesses were evenly split with 48 (25.8 percent) reporting business was worse, and another 48 reporting it was better. For those doing worse, the average reduction in business volume was 28.5 percent (SD 14.5). For those reporting improved performance, the average increase in volume was 33.3 percent (SD 32.1). Thus, approximately three-quarters of the sample had fully recovered in terms of business performance. Descriptive analysis Means, standard deviations, and correlations for all numeric variables are shown in Table I. The highest average problem rating was given for the declining national economy (M 3.28; SD 1.37), while the least problematic item was managerial decision making (M 1.71; SD 0.98). Of the ten variables that could potentially affect organizational performance, ve were signicantly correlated with the percentage of gain versus loss in revenue compared to pre-Katrina levels. As expected, the population variable loss of customer base was most highly correlated with organizational performance (r 2 0.39; p , 0.01). The other population variable, problems with labor shortages, had the second largest correlation with organizational performance (r 2 0.24; p , 0.01). These results are consistent with H3 in which we expected

Variable

Mean

SD

10

11

0.32 * * 0.52 * * 0.47 * * 0.22 * * 0.40 * * 0.27 * * 0.28 * * 0.34 * * 2 0.24 * * 2 0.39 * * 0.46 * * 0.44 * * 0.43 * * 2 0.23 * * 0.77 * * 0.43 * * 2 0.08 0.43 * * 20.00 20.24 * * 0.45 * * 0.26 * * 0.32 * * 0.38 * * 0.28 * * 0.32 * * 0.43 * * 0.46 * * 0.32 * * 2 0.13 0.33 * * 0.38 * * 0.39 * * 0.39 * * 0.42 * * 0.40 * * 2 .18 * 0.30 * * 0.31 * * 0.52 * * 0.36 * * 0.26 * * 0.32 * * 0.24 * * 20.13 * *

1. Number of employees 367.61 1,303.93 2. Problems with suppliers 1.85 1.06 20.08 3. Insufcient capital 1.99 1.19 20.08 4. Poor managerial decisions 1.71 0.98 20.07 5. Labor shortage 2.31 1.19 20.04 6. Loss of customer base 2.45 1.28 20.13 7. Slow neighborhood recovery 2.23 1.27 20.09 8. Slow progress state/local government 2.52 1.29 0.01 9. Lack of federal assistance 2.28 1.27 20.03 10. National economic decline 3.28 1.37 20.15 * 11. Org. performance (% gain/loss) 1.28 24.89 0.09

Notes: n 186; signicance at: *p , 0.05 and * *p , 0.01

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Table I. Means, standard deviations, and intercorrelations among main study variables

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population-related issues to continue to present the biggest obstacles faced by New Orleans businesses working towards recovery four years after Hurricane Katrina. In partial support of H2, one internal variable, lack of capital, had a signicant inverse relationship with organizational performance. This correlation was the lowest signicant correlation of those including organizational performance (r 2 0.18; p , 0.05). Finally, in partial support of H4, two of the four macro variables measured were inversely related to organizational performance. Problems attributed to the national economic decline (r 2 0.24; p , 0.01) and slow neighborhood recovery (r 2 0.23; p , 0.01) had a similar negative effect on organizational performance. Mean differences in internal, population, and macro variables across performance status groups In order to examine whether organizations reporting their current status as worse, the same, or better since Hurricane Katrina showed predictable mean differences on the ten factors affecting organizational performance, a one-way analysis of variance (ANOVA) with post-hoc paired comparisons was conducted using performance status as the independent variable and each of the ten factors as dependent variables. Results including the mean differences according to performance status are reported in Table II. With the exception of number of employees, higher mean scores indicate more problematic factors. Based on the group mean scores across the ten factors, managers in the worse performance status group indicated the most problematic areas for their organizations were the decline of the national economy and the loss of their customer base. Managers in organizations reporting the same or better performance status since Hurricane Katrina also ranked the decline of the national economy as their biggest problem; however, their second most problematic area focused on the slow recovery progress displayed by state and local governments. The one-way ANOVAs revealed that seven of the ten factors examined showed different average ratings across the performance status groups. Two internal factors, problems with suppliers (F (2, 183) 4.84; p , 0.01) and lack of capital (F (2, 183) 9.13; p , 0.01), showed signicant mean differences across the three levels of performance status (better, the same, or worse). Post hoc paired comparisons revealed that these

Dependent variable Number of employees Problems with suppliers Insufcient capital Poor managerial decision making Labor shortages Loss of customer base Slow neighborhood recovery Slow progress state/local government Lack of federal assistance National economic decline

Better (n 48) 689.30 1.79a 1.90a 1.65a 1.83a 2.04a 1.92a 2.56a 2.38a,b 2.96a
a

Same (n 90) 299.48 1.68a 1.72a 1.61a 2.28b 2.22a 2.04a 2.31a 2.03a 3.11a
a

Worse (n 48) 173.67 2.25b 2.58b 1.96a 2.83c 3.27b 2.88b 2.85a 2.67b 3.92b
a

F 2.14 4.84 9.13 2.14 9.31 15.91 9.46 2.87 4.23 7.76

p 0.121 0.009 , 0.001 0.120 , 0.001 , 0.001 , 0.001 0.059 0.016 0.001

Table II. ANOVA results for organizations with better, the same, or worse performance status

Note: Mean in the same row that do not share a superscript differ at p , 0.05 in the Tukey honestly signicant difference comparison

factors were signicantly more problematic in organizations reporting worse performance since Hurricane Katrina compared to those reporting the same or better performance status across the past four years. Regarding the two population variables affecting organizational performance, both labor shortages (F (2, 183) 9.31; p , 0.01) and loss of customer base (F (2, 183) 15.91; p , 0.01) showed signicant mean differences across the performance status groups. According to the post hoc comparisons, all three groups differed signicantly in labor shortages with the most problems being reported by worse status organizations (M 2.83), followed by same status organizations (M 2.28), and then better status organizations (M 1.83). Differences in labor shortages may be used to discriminate among all three levels of performance status for organizations in post-Katrina New Orleans. Similar to the results regarding the internal variables, the population variable loss of customer base only showed a signicant mean difference between organizations with a worse performance status (M 3.27) compared to those with the same (M 2.22) or better performance status (M 2.04). Finally, three of the four macro variables, slow neighborhood recovery (F (2, 183) 9.46; p , 0.01), lack of federal assistance (F (2, 183) 4.23; p , 0.05), and national economic decline (F (2, 183) 7.76; p , 0.01), had signicant mean differences across levels of organizational performance status. As expected, managers of organizations in the worse performance status group indicated signicantly greater problems in the areas of slow neighborhood recovery and national economic decline compared to the other two groups. In the area of lack of federal assistance, post hoc paired comparisons showed that the only statistically signicant difference was between organizations in the worse and the same performance status groups. The better performance group did not differ statistically from either of the other two groups. Notably, the fourth macro variable, slow response on the part of state and local governments (F (2, 183) 2.87; p 0.059), displayed marginally signicant mean differences across the three performance status groups. Again, the worse performance status group had the highest mean score in this area. Predictive effects of internal, population, and macro variables on organizational performance To determine which problems were most predictive of the amount of business decline or gain, a multiple regression analysis was conducted using the percentage of business improvement or decline as the dependent variable. Results are shown in Table III. Although the correlation results presented earlier showed that ve out of the ten factors within the internal, population, and macro variables were signicantly related to prot loss and gain, the regression results did not echo this nding. The predictors in this model account for approximately 26 percent of the variability in organizational performance. Regarding industry sector, the results supported H1 in that industry sector did seem to make a difference. Businesses in the manufacturing or construction sector were performing signicantly better (t 1.99, p , 0.05) compared to those in retail or service sectors. Retail vs service showed no signicant effect. In contrast with H2, none of the internal variables proved to be signicant predictors of business performance this long after Katrina. Population issues, on the other hand, do seem to be a continuing problem for those organizations that are oundering. The problem most strongly associated with performance was customer loss (b 2 0.37;

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Variable Sector Manufacturing/construction Retail/wholesale Internal features Number of employees Problems with suppliers Insufcient capital Poor managerial decision making Population issues Labor shortages Loss of customer base Macro variables Slow neighborhood recovery Slow progress state/local government Lack of federal assistance National economic decline
a

Unstandardized coefcient 11.26 * 0.66 0.00 2.49 2 0.19 2 0.19 2 4.39 * 2 8.30 * * 2 1.32 2 1.05 2 6.02 * 2 2.92

SE 5.67 4.48 0.00 2.21 2.03 2.62 2.03 1.89 1.99 2.48 2.47 1.73

Standardized coefcient 0.14 0.01 0.05 0.09 2 0.01 2 0.01 2 0.18 2 .37 2 0.06 2 0.05 2 0.27 2 0.14 Total R 2

DR 2 for block

0.024

320

0.049 0.142 * *

Table III. Regression results for predicting amount of gain/loss in business volume since Katrina

0.042 * 0.257

Notes: n 186; signicance at: *p , 0.05 and * *p , 0.01; adummy-coded with services as reference category

p , 0.01). Labor shortages was a signicant problem as well (b 2 0.18; p , 0.05). However, in contrast to H3, the population variables as a whole were not the most inuential predictors in the multiple regression analysis. Loss of customer base was the clear winner in terms of creating the most problems impeding business recovery, but the other population variable, problems with labor shortages, had the smallest impact of all the signicant predictors in the multiple regression model. Among the macro level variables, only lack of aid from the Federal Government was signicantly blamed for performance difculties (b 2 0.27; p , 0.01). Although all respondents had rated the declining national economy as being problematic, this did not relate to how successful those businesses were. Neighborhood progress and state/local government aid also failed to show signicant impacts. Discussion The good news here is that three-quarters of the businesses surveyed report doing as well or better than they were before Hurricane Katrina. In fact, some are doing astoundingly better. This is consistent with previous research showing that most businesses do in fact recover eventually after a natural disaster (Tierney, 1997). Results from the ANOVA analysis supported the idea that organizations performing worse relative to their pre-Katrina levels were suffering with more problems across internal, population, and macro variables compared to organizations performing the same or better. In most areas, organizations performing the same or better compared to their pre-Katrina levels were virtually indistinguishable in terms of the magnitude of problems they have experienced. However, those performing worse reported more problems in several areas. They were more likely to continue to have difculties with

suppliers and report problems with sufcient capital. That these difculties persist even four years post-Katrina attests to the long-term nature of recovery after a disaster of such magnitude. Although managers for businesses in all performance categories rated the highest problem area as the declining national economy, the most dramatic differences between worse performing organizations and all others were the problems caused by the health of the larger neighborhood and city. Loss of customer base was an especially stark distinguishing feature, with problems acquiring labor and slow neighborhood recovery also being strong differences, showing how strongly business recovery is tied to recovery of the larger community. In the regression, none of the features internal to businesses was found to be signicantly related to the level of business increase or decrease. This is very likely due to the fact that this data were collected between three and four years after the disaster. The advantages of business size may be especially important for short-term recovery; those that have persevered this long clearly had enough resources to do so. Similarly, those owners and managers who made very poor decisions immediately post-Katrina may have failed to successfully reopen at all, whereas those who have persisted this long were those who showed at least satisfactory levels of competence. And while problems with capital did distinguish struggling businesses in the ANOVA analyses, these problems were not predictive of degree of performance change, so this may be simply an issue of whether or not capital is sufcient, with gradations of sufciency above that being of minimal importance. The primary issue now seems to be population related, especially in regards to the amount of available customers. Those businesses doing worse were more likely to say that the loss of their customer base was very problematic for them, and they are more likely to be plagued by labor shortages. Thus, what may be most helpful for these businesses would be to encourage more people to move (back) to New Orleans. This may be one reason why, of the macro-level variables, the Federal Government appears to get the most blame. There are many individuals who were displaced by Hurricane Katrina who wish to return to New Orleans, but are unable to do so without assistance in rebuilding (ISS, 2009). The FEMA has borne most of the responsibility of providing aid to people who wish to return, and their performance has not been well reviewed (ISS, 2009). Thus, businesses may be drawing the connection between a shortfall in aid to help population return and their own reduced customer base, and thus also their agging performance numbers. Businesses may also be attributing their difculties to federal failures more than to those at the neighborhood, local, or state levels because their expectations of the Federal Government are higher. FEMA was certainly expected to do more to aid New Orleans than they ultimately accomplished; the very well-publicized failures of FEMA may have created an understanding that it was FEMAs responsibility to be providing aid, more than lower-level entities. Also, for business owners, the performance of the SBA may have factored into this attribution. SBA performance was marked by loans requiring inordinate amounts of documents that many, whose businesses were utterly destroyed, had no way of providing (Runyan, 2006). The SBA was also extremely slow in providing responses to applications for loans (Loten, 2005). The methodological limitations of this study impact the broadness with which the results can be generalized. The rst limitation concerns the cross-sectional design of the study. A longitudinal study of business recovery would have been statistically more

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powerful and better able to reect recovery change over time. In addition, a longitudinal approach would have allowed the tracking of post-disaster business survivals and business deaths. In this study, only GNO area businesses open prior to Katrina that managed to reopen and remain in operation nearly four years after the storm were included in the sample. This focus on businesses that achieved long-term survival after Katrina most likely resulted in a truncated distribution for many of the main study variables including our main criterion variable organizational performance. These results and conclusions may be characterized as suffering from a general survivor bias. Although over 25 percent of owners and managers reported declining organizational performance compared to pre-Katrina levels, we suspect that area businesses with the worst performance were less likely to survive four years post-Katrina, and were therefore less likely to be included in our sample. Perhaps, one indicator of the survivor bias in our data was the lack of signicant effect that neighborhood recovery had on organizational performance. Neighborhood recovery greatly impacted the likelihood of business survival or death (Lam et al., 2009). Because the Katrina-related damage varied greatly by neighborhood, local government ofcials prioritized the restoration of basic services (e.g. utilities, postal service, sanitation service) for geographic areas with the least amount of damage and the most potential for a quick recovery. Clearly, this gave business owners and managers in less damaged areas an advantage over those whose businesses were located in more heavily damaged areas. Businesses in neighborhoods that were especially slow to recover or that never recovered faced additional challenges making their post-disaster survival less likely. Our results in this area should be interpreted only to suggest that the level of neighborhood recovery is not a determining factor in the degree of success for surviving business. Rather, neighborhood recovery may play a more vital role in likelihood of business survival or death. Another problem created by differing rates of neighborhood recovery is that the difculties and challenges related to factors external to a business may have impacted businesses in the same neighborhood or geographic location in a systematic, non-random manner. When properties within a geographic space covary, this creates a spatial dependence among observations within that space. This is an issue in this study because linear regression analysis assumes observations are independent. Violations of the independent observations assumption can lead to unstable parameter estimates and yield unreliable signicance tests in regression analysis. In the current sample, although the parish in which businesses operated was recorded, specic neighborhood locations were not. Given that the level of damage and neighborhood recovery varied greatly within parish lines, it was not possible to control for geographic proximity or neighborhood of business locations other than at the parish level. In sum, the current results suggest that after initial emergency recovery is complete, the long-term success of businesses that have been subject to a natural disaster is primarily dependent on the recovery of their customer and labor base. Also, the Federal Government has been expected to do more to help business owners and to help rebuild the population. Businesses probably should anticipate a possible dearth of government assistance in planning for future disasters, and consider how they could survive without it. Nonetheless, most of the organizations surveyed here were doing relatively well, which lends a great deal of hope for the continued recovery of New Orleans in the future.

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