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Sea Briefs is a report on the results of the Mississippi-Alabama Sea Grant Consortium.

Editor: Laura Bowie

This newsletter is available in PDF format from:
masgc.org/seabriefs

MASGC supports applied, interdisciplinary marine science research, education and outreach efforts to foster the sustainable development and management of the Mississippi and Alabama coasts and nearshore ecosystems of the Gulf of Mexico

Mississippi-Alabama
Sea Grant Consortium
703 East Beach Drive
Ocean Springs, MS 39564
Phone: 228-818-8838
E-mail: seabriefs@masgc.org
MASGP 09-011-01

Open for business
New Orleans study evaluates reasons businesses reopened after Katrina

After Hurricane Katrina, four researchers from Louisiana and Texas embarked on a study to develop models related to business return after a catastrophe. Partially funded by the Gulf of Mexico Sea Grant Programs, the group includes Nina Lam, a GIS expert with the Louisiana State University Department of Environmental Sciences; Kelley Pace, director of the Real Estate Research Institute; Richard Campanella, assistant director at the Center for Bioenvironmental Research at Tulane University; and James LeSage, professor of finance and economics at Texas State University.

While many factors naturally influence business return decisions, Lam and her colleagues paid particular attention to the role played by a business’ dependence on the return of other nearby businesses, i.e., “spatial dependence.”

“Spatial relation is a variable to add to the traditional factors (size of business, type of business, etc.), so it is not replacing, but rather adding to the explanation,” said Lam of the ability to identify why certain businesses reopened after the storm and
others did not.

The study began within six weeks of the devastating storm in 2005. Certain findings were expected: heavily flooded business districts returned more slowly than others. Other findings were more surprising: locally-owned, independent businesses returned sooner than large, cash-rich chain stores (73 percent versus 47 percent within six months after Katrina).

Initially, the researchers thought that the major retailers, having more available capital and the ability to bring in outside resources, would give them an advantage. However, what they found was that the major retailers did not attempt to rebuild, but rather relied on their stores outside the district to service the local residents. If not severely damaged by the flood, independent businesses were more likely to reopen sooner than the chain stores because they needed to.

From a spatial perspective, a retail cluster attracts more customers than an isolated store, so it pays for retailers to cluster together – even under normal conditions. The researchers found that, during a disaster recovery period, a single retailer’s return significantly helped all others in the cluster. Therefore, the more independent businesses in a cluster that can reopen after a disaster, the more everyone benefits. Magazine Street benefited doubly as a locus of high-end shops and boutiques that escaped flooding. Nearly all its businesses reopened within four months. Based on preliminary data, the business recovery models developed by Lam, Pace, Campanella and LeSage may make major contributions to recovery policy.

“Determining the spatial dependence of businesses in an area helps to better estimate the cost of a disaster,” said Pace. “In addition, given finite recovery resources, spatially aware recovery strategies focus resources on particular clusters as opposed to smaller amounts being distributed over a wider area.”

A possible outcome may be that aid given to a single business that is geographically connected to other businesses may spur more economic activity than aid given to isolated businesses.

Given that the models have potential application for a variety of disasters, the findings of the project will be widely published. Already, the researchers have presented their findings in various public hearings and news features. Also, the project will be presented at national geographical science and spatial econmetrics conferences later this year.