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Economic resilience of the firm: A production theory approach

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  • Dormady, Noah
  • Roa-Henriquez, Alfredo
  • Rose, Adam

Abstract

As a result of catastrophic events, firms and other organizations are faced with input shortages and price shocks. Firms can respond to these events using a variety of “resilience” actions, or tactics. Here we provide a microeconomic foundation for analyzing a comprehensive range of these tactics, incorporating both inherent and adaptive concepts of resilience. We classify these tactics and derive optimality conditions for production with the use of each class of resilience in the context of a nested Constant Elasticity of Substitution (CES) function consisting of aggregated Capital (K), Labor (L), Infrastructure (I), and Materials (M). The framework has broad applicability, including measurement and scoring of resilience, cost-effectiveness assessment of resilience tactics individually and as a group, calculation of resilience indices, and supply-chain management.

Suggested Citation

  • Dormady, Noah & Roa-Henriquez, Alfredo & Rose, Adam, 2019. "Economic resilience of the firm: A production theory approach," International Journal of Production Economics, Elsevier, vol. 208(C), pages 446-460.
    • Handle: RePEc:eee:proeco:v:208:y:2019:i:c:p:446-460
    DOI: 10.1016/j.ijpe.2018.07.017
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    11. Maureen S. Golan & Laura H. Jernegan & Igor Linkov, 2020. "Trends and applications of resilience analytics in supply chain modeling: systematic literature review in the context of the COVID-19 pandemic," Environment Systems and Decisions, Springer, vol. 40(2), pages 222-243, June.
    12. Ahmadi, Somayeh & Saboohi, Yadollah & Vakili, Ali, 2021. "Frameworks, quantitative indicators, characters, and modeling approaches to analysis of energy system resilience: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 144(C).
    13. Calzada Olvera, Beatriz & Gonzalez-Sauri, Mario & Moya, David-Alexander Harings & Louvin, Federico, 2022. "Covid-19 in Central America: Firm resilience and policy responses on employment," Journal of Policy Modeling, Elsevier, vol. 44(6), pages 1280-1295.
    14. Essuman, Dominic & Boso, Nathaniel & Annan, Jonathan, 2020. "Operational resilience, disruption, and efficiency: Conceptual and empirical analyses," International Journal of Production Economics, Elsevier, vol. 229(C).
    15. Mena, Carlos & Karatzas, Antonios & Hansen, Carsten, 2022. "International trade resilience and the Covid-19 pandemic," Journal of Business Research, Elsevier, vol. 138(C), pages 77-91.
    16. Kovach, Jeremy J. & Swink, Morgan & Rodriguez, Mauricio, 2023. "A novel measure of firm-level production outsourcing," International Journal of Production Economics, Elsevier, vol. 263(C).
    17. Yanli Ma & Jieyu Zhu & Gaofeng Gu & Ke Chen, 2020. "Freight Transportation and Economic Growth for Zones: Sustainability and Development Strategy in China," Sustainability, MDPI, vol. 12(24), pages 1-17, December.
    18. Xue, Longfei & Gong, Yeming & Yang, Bingnan & Xu, Xianhao, 2024. "Resilience, efficiency fluctuations, and regional heterogeneity in disaster: An empirical study on logistics," Socio-Economic Planning Sciences, Elsevier, vol. 93(C).
    19. Pereira, Carla Roberta & Lago da Silva, Andrea & Tate, Wendy Lea & Christopher, Martin, 2020. "Purchasing and supply management (PSM) contribution to supply-side resilience," International Journal of Production Economics, Elsevier, vol. 228(C).
    20. Walheer, Barnabe & Hudik, Marek, 2019. "Reallocation of resources in multidivisional firms: A nonparametric approach," International Journal of Production Economics, Elsevier, vol. 214(C), pages 196-205.
    21. Li Cui & Hao Wu & Lin Wu & Ajay Kumar & Kim Hua Tan, 2023. "Investigating the relationship between digital technologies, supply chain integration and firm resilience in the context of COVID-19," Annals of Operations Research, Springer, vol. 327(2), pages 825-853, August.

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    More about this item

    Keywords

    Economic resilience; Production theory; Inherent and adaptive resilience; Disasters;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other
    • L39 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Other
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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