Playing With Fire: the Effects of Institutional Dysfunctions in Postdisaster Business Recovery

Abstract

Although previous research has illuminated our scholarly understanding of the general effects of institutional dysfunction, there remains a conspicuous dearth of research on how institutional dysfunction shapes postdisaster business recovery. Drawing on insights from entrepreneurs affected by fire outbreaks in marketplaces in a developing economy, this study uncovers two unique and interrelated stages that illuminate how institutional dysfunction manifests over time. Throughout these stages, we observe institutional dysfunction acting as an “accelerator” in the wake of the fire outbreaks, ultimately leading to business closures. Intriguingly, the study reveals that dysfunctions not only expose the faulty practices and routines of businesses but also highlight the fragilities and obstructive nature of existing formal and informal institutions. This multifaceted analysis unravels the more intricate process of how the effects of institutional dysfunction unfold over time, commencing with the sensemaking of marketplace fire outbreaks and focusing on institutional shortcomings and inadequacies (i.e., Stage 1). The unfulfilled promised financial and nonfinancial support by various political actors culminate in a downward spiral, ultimately resulting in disaster-induced business demise (i.e., Stage 2). The theoretical implications and practical risk mitigation strategies of the study are outlined.