Resilience strategies for regional essential service providers: evidence from disasters, pandemics, and economic crises

This study investigates the effects of different strategies on the resilience of regional essential service providers based on three types of external shocks: disasters, pandemics, and economic crises. An empirical analysis using panel data of Japan’s 28 major railway firms produced the following results. First, among the firms’ strategies for preparedness, absorbed slack and business diversification absorb the initial impact of a disaster shock. Unabsorbed slack enhances overall resilience, and the relative rate of short-term borrowing to long-term borrowing increases firms’ resilience and resistance to disaster and pandemic shocks. Second, among the strategies for preparedness implemented by stakeholders, government ownership strongly enhances overall resilience and resistance to all three types of external shocks. Cooperative relationships with other firms also increase firms’ resilience. Shareholding by large corporations, top management, and financial institutions as well as regular subsidies reduces firms’ resilience or resistance. Foreign ownership has mixed effects: It decreases resilience and resistance to a disaster shock but increases resistance to an economic shock. Third, among ex-post strategies implemented after external shocks, new loans decrease a firm’s resilience, whereas an emergency subsidy from the government has no significant effect. Fourth, essential service providers are more vulnerable to disaster and pandemic shocks than economic shocks owing to their large infrastructure networks. Overall, preparedness by firms is important for disaster shocks, and preparedness by stakeholders plays an important role in economic shocks. Strategies to ensure the overall resilience of essential infrastructure services should consider the complementarity of each measure.