When disasters like hurricanes, floods, and wildfires strike, the economic consequences can be severe and long-lasting. As these events occur more often, building the resilience of local economies has become a top priority for policymakers, businesses, and communities. However, not all communities are equally resilient. Our study in the Journal of Business Venturing Insights shows that places with more young and small firms are significantly more resilient to extreme weather events.

How and why do entrepreneurs increase the resilience of local economies?

It is not clear a priori that regions with more young and small firms would be more resilient to extreme weather shocks. On the one hand, we know that younger firms and small and medium-sized enterprises (SMEs) must be resilient to survive. These organizations are more responsive to threats and opportunities, more accustomed to working under uncertainty and experimenting, and more likely to act on new information. These characteristics have been identified as predictors of both entrepreneurial success and resilience. On the other hand, young and small firms may be more vulnerable than their larger counterparts. For example, they may lack redundancies or access to external capital in times of stress due to their small size.

The local resilience benefits of entrepreneurship

To address this empirical question, we analyze 18 years of quarterly data from over 2,700 U.S. counties, along with detailed information on damages caused by extreme weather events. Using an event study design, we examined the economic impact before, during, and after the events. Specifically, we examined how the employment share of young and small firms influenced the local labor market’s ability to withstand and recover from the shock.

Our results demonstrate that extreme weather damage has a persistent negative effect on employment growth, lasting at least five quarters (see Panels (a) and (c) in the figure). The higher the employment share of young or small firms, the more mitigated the overall employment effects are (Panels (b) and (d) in the figure). Therefore, our findings are consistent with the notion that a region’s resilience to extreme weather shocks increases with the number of entrepreneurial organizations in its local economy. These effects are both economically relevant and statistically significant.

Why this matters: Strengthening local entrepreneurship increases resilience to extreme weather shocks

These findings go beyond traditional thinking about disaster response. Although physical infrastructure and insurance are still important, economic resilience also depends on the composition of the local economy. Therefore, policymakers and investors should recognize the economic resilience benefits of supporting entrepreneurial ecosystems. This includes providing targeted support for early-stage firms, eliminating unnecessary barriers to entry, and incorporating entrepreneurship into resilience planning. Investing in small and young businesses benefits economic development and protects local economies from extreme weather events.

By highlighting the systemic value of entrepreneurship, which is often overlooked, this paper invites a shift in how we think about resilience. Resilience is not just a matter of emergency plans and physical infrastructures; it is also something intimately connected to the structure and vitality of the local business landscape. If you’re involved in climate adaptation, regional economic development, or entrepreneurship policy, this study provides strong empirical evidence that young and small firms deserve more attention—and investment—as part of resilience strategies.

Read the full paper here: https://www.sciencedirect.com/science/article/pii/S2352673425000289?via%3Dihub

---

Author bios

Christian Heinzel is a PhD student at the University of Mannheim Graduate School of Economic and Social Sciences. His present research focuses on public finance and corporate taxation.

W. Scott Langford is an incoming assistant professor in the Department of Political Science at Texas State University. He currently serves as a post-doctoral research fellow in the School of Public Affairs at Arizona State University. He earned his PhD in Public Policy at the University of North Carolina at Chapel Hill. In his research, he examines how economies react to shocks (e.g., extreme weather events) and identifies moderating conditions (e.g., entrepreneurship).

Vinzenz Peters is a post-doctoral researcher at the Institut für Mittelstandsforschung (IfM) Bonn. He received his PhD in Economics in 2025 from Maastricht University. His current research focuses on how firms and finance shape the economic resilience, development, and sustainability of regions in the face of shocks, crises, and climate change.       

Mark Sanders is Professor of international economics at Maastricht University School of Business and Economics. He was a senior research fellow at the Max Planck Institut fuer Economics: Entrepreneurship and Public Policy, Jena, Germany, where his research focused on the macroeconomics of entrepreneurship. He has published in a wide range of journals on a wide range of topics. In his current research he links entrepreneurship to finance, sustainability and resilience.