Does Natural Disaster Increase Start-ups?

An Empirical Analysis on the Great East-Japan Earthquake

Hiroyuki Okamuro and Tomofumi Sarugaku

Previous studies suggest that business start-ups increase after natural disaster due to psy- chological, networking, and economic reasons. Yet, no empirical estimations have been done on this issue, considering causal inference. Thus, focusing on the Great East-Japan Earth- quake, we investigate causal impacts of natural disaster on local start-up ratio, by employing standard econometric techniques. Using municipality data from public census, we construct a panel data set with four periods before and after the Great East-Japan Earthquake（2001─ 2004, 2006─2009, 2012─2014 and 2014─2016）and 1,734 municipalities in Japan. We employ fixed-effect panel estimation with DID approach to consider causality, where the treatment group comprises the municipalities officially designated as Special Disaster Area（or speci- fied as Tsunami Area）and the control group covers all other municipalities. Specifically, we distinguish between the effects on gross and net start-up ratio. We also consider the effects on average start-up size measured as the average number of employees. The estimation re- sults show that this disaster had a positive and significant impact on the start-up ratio in the Special Disaster Area, which is even stronger in the Tsunami Area. We also find that the impact is especially evident in the sectors that are essential for the reconstruction or di- rectly related to consumer service. We also confirm these positive effects for independent start-ups. We find that the average size of start-ups is not significantly affected by this earthquake. Finally, the results show that the positive and significant effects of（the recov- ery from）the natural disaster on start-up ratio during 2012─14 become weaker or even sta- tistically insignificant during 2014─16, suggesting that the effects of the disaster may not persist.

This paper focuses on emerging processes of entrepreneurs who made business innovations during the Meiji era, when the modern society was formed, from the perspectives of entrepreneurial history and business history.

The individual data （home situation, educational background, processes to entrepreneurship, and types of innovation） of 46 entrepreneurs were analyzed, and common factors in their emerging processes were sought. As a finding, there were four types in the emerging process :（ 1） network type,（ 2） regional development type,（ 3） merchant type, and（ 4） technology type.

As for the network type, entrepreneurs utilized advantages of networking with government/ business leaders/ relatives to acquire advanced western knowledge （i.e. unique information for venturing） which was necessary for modern organization management. Regarding the regional development type, the entrepreneurial activities have characteristics of developing regional industries suitable for the times. Those entrepreneurs, who were mainly local elites playing official and influential roles in their regions, utilized information required for venturing that contributes to regional development （i.e. unique information for venturing） from local and political experts.

As for the merchant type, entrepreneurs were engaged to their merchant activities connected with opportunities for new innovative businesses. Those who became such merchants came mainly from farmers who aimed successful career and independence. In their works as merchants, they succeeded in business by acquiring the earliest information （i.e. unique information for venturing）. Finally in the technical type, entrepreneurs raised a business by using technologies acquired through skill acquisition and invention. This type often came from merchants, and as a part of management efforts, they aimed at the creation and invention of new products or technologies that had not existed in Japan so far. Here information on new western product/ technologies（ i.e. unique information for venturing） played a crucial role.

Access to such information for venturing above was a key for entrepreneurs who successfully created new modern businesses.