UvA research: What do companies do when a storm surge hits the Randstad?
If the Randstad is flooded, will companies help rebuild the city or will they pack their bags? UvA researchers figured it out for Amsterdam and Rotterdam in what they quickly dubbed the crazy paper. “Companies’ primary responses are not about economically rational choices.”
Mention a climate disaster in the Netherlands and most people are likely to say, Watersnoodramp, 1953, the storm surge that flooded large parts of Zeeland, South Holland and North Brabant. Imagine if that disaster were to happen again, but in the Randstad. This is just what UvA researchers Panikos Georgallis, Ans Kolk and Siri Boe-Lillegraven outline in an article they published in the Journal of Management Studies. Using that scenario, they analyzed the possible responses of companies in Amsterdam and Rotterdam. We put five questions to first author and business researcher Siri Boe-Lillegraven.
Why do you call the article the crazy paper?
“We outline an extreme scenario: the flooding of the Randstad, which has more than eight million inhabitants. We call that crazy, perhaps also out of self-protection because after all, we live in the Randstad below sea level so the scenario of flooding is not very reassuring. When we started the project in 2019 we thought it was really crazy, now unfortunately we often get the reaction: ‘This is not crazy.’”
The Netherlands are known worldwide for their excellent Delta Works, aren’t they? How likely is the scenario of the Randstad flooding?
“It is a fictitious scenario with low probability, but not impossible. The fact that the Netherlands is so successful in water management also carries the risk that we will rest on our laurels. Keeping our feet dry is a work in progress, and the situation is also changing due to climate change, rising sea levels, and more extreme weather. In early November, Amsterdam narrowly escaped being flooded by storm Ciarán. The question is not if, but when it will happen, according to climate experts.”
The Dutch generally react quite indifferently to news of rising sea levels.
“I noticed that when I moved to Amsterdam from Norway. Here I look with fascination and amazement at how much money people put into digging cellars for living quarters. Indeed, when I bring that up, the Dutch refer to the fantastic and world-famous Dutch water works. Their reasoning is that if the dikes break, we are all in the same boat. As an outsider, I was struck by the stark contrast between discussions in politics about sea level rise and the daily practice of citizens and businesses who see it as the most normal thing in the world. From my position as a business researcher, I wondered how businesses—which are crucial to cities—would react to a climate disaster such as a storm surge in the Randstad and how that would affect residents. There appeared to be very little literature on that.”
Don’t all companies react the same way to a climate disaster? Don’t they make a cost-benefit analysis and act accordingly?
“No, companies’ primary responses are not about economically rational choices. After all, a flood like this is always unexpected and shocking. There are roughly three ways in which companies then react: fight, flight or freeze.”
“How they react depends on a number of factors. On location: Does a company identify with the community in which it is situated? On the sense of loss: If a company has incurred significant losses, it might first become paralyzed and then be more likely to start over somewhere else (flight). On the sense of time: Especially legacy-oriented companies, such as family-owned businesses, may have difficulty responding immediately to new circumstances. Security also plays a role. If a company relies heavily on its own abilities or those of the authorities to rebuild the city, they are more likely to stay.”
“Companies in Rotterdam and Amsterdam would therefore react differently. In Rotterdam, companies are more focused on infrastructure and transportation; in Amsterdam, they are more focused on services and finance and there are many more expats. Therefore our model predicts that Rotterdam would see the flood as a wake-up call to better position itself as the industrial center, and much of the economy in Amsterdam would be wiped out within months, never to fully recover.”
Who benefits from this paper?
“The value of our article is for policymakers and researchers to understand that if a climate disaster hits the Netherlands, the reactions will vary from company to company. The more knowledge policymakers have about what drives companies and how to respond, the better they can anticipate, communicate, and respond to a disaster and the faster society can recover from the hit.”
