Flood risk reduction and climate change adaptation of manufacturing firms: Global knowledge gaps and lessons from Ho Chi Minh City

Abstract

Flooding places continuous stress on small- and medium-sized enterprises (SMEs) particularly in developing and transition economies that depend on their firms’ performance, but may have not fully developed flood protection infrastructure. Yet, detailed knowledge about whether and how firms take adaptation action against flood hazards, including potential adaptation barriers, is surprisingly thin. We respond to this gap by offering an empirical analysis of small- and medium-sized manufacturing firms in Ho Chi Minh City (HCMC), one of the front lines of future environmental risk. Drawing on qualitative interviews, our study has two main aims: first, to understand if adaptive action occurs more intensively among firms that previously faced high direct impacts, and second, to shed light on other internal firm characteristics as well as external conditions that determine firm decisions to undertake flood adaptation measures. We find that the majority of firms cope reactively to prevent severe flooding effects. Interestingly, experience with past events, including those of high impact, do not directly lead to long-term strategic adaptation. A lack of business capabilities and financial capacity, combined with insufficient support systems, largely hamper proactive adaptation. This leads to increased risks and self-reinforcing effects, which quickly endanger the future business viability of firms. Future research on adaptation to climate change should seek to improve understanding of adaptive capacities among SMEs, which are quite different from those of large international corporations.