Are we expecting too much from the private sector in flood adaptation? Scenario-based field experiments with small- and medium-sized firms in Ho Chi Minh City, Vietnam

Authors: Roxana Leitold*, University of Cologne, Javier Revilla Diez, University of Cologne, Van Tran, University of Economics and Law, Vietnam National University
Topics: Economic Geography, Hazards, Risks, and Disasters, Asia
Keywords: Private sector adaptation, Climate change, Flood response, Small- and medium-sized firms, Field experiments, Vietnam
Session Type: Virtual Paper
Day: 4/8/2021
Start / End Time: 1:30 PM / 2:45 PM
Room: Virtual 7
Presentation File: No File Uploaded

Adaptive governance approaches emphasize the crucial role of the private sector in enabling climate change adaptation. Yet, the participation of local firms is still lacking, and little is known about the conditions potentially influencing firms’ adaptation decisions and mechanisms that might encourage private sector engagement. We address this gap with an empirical analysis of the willingness of manufacturing small- and medium-sized enterprises (SMEs) to participate financially in collective flood adaptation in Ho Chi Minh City (HCMC), a hotspot of future climate change risk. Using scenario-based field experiments, we shed light on internal and external conditions that influence potential investments in collective initiatives and explain what role SMEs can play in flood adaptation. We find that direct impacts of floods, perceived self-responsibility and strong local ties motivate firms to participate in collective adaptation, whereas government support, sufficient financial resources, and previously implemented flood protection strategies reduce the necessity to act collectively. Here, opportunity costs and the handling of other business risks play a decisive role in investment decisions. This study shows that although private sector engagement appears to be a promising approach, it is not a panacea. Collective initiatives on flood adaptation need formal guidance and should involve local business networks and partnerships to give voice to the needs and capacities of SMEs, but such initiatives should not overstretch firms’ responsibilities.

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