Procedural Fairness and Small Business Owner Satisfaction with Grants during Post-Hurricane Katrina Recovery

Small businesses in New Orleans have been one of the biggest casualties of Hurricane Katrina. However, small business recovery efforts face a number of challenges, including a lack of inadequate access to capital for recovery, difficulties related to federal government aid, devastated infrastructure, etc. It is critical for government to deploy necessary resources for a smooth and speedy recovery of small business. Based on justice theory research, this study attempts to examine the impacts of procedural fairness on small business owner satisfaction with government grants. To investigate the proposed relationships, data was collected from 200 small businesses in New Orleans. The findings showed that interactional justice (interpersonal treatment), not procedural justice (formal procedure), had a significant positive effect on small business owner satisfaction. BACKGROUND PERSPECTIVES Hurricane Katrina further exacerbated the serious economic challenges faced by New Orleans even before Katrina. The flooding, wind, rain, and unfortunate looting and arson associated with the storm, destroyed or damaged thousands of businesses. Commerce was seriously interrupted in industries such as entertainment, hospitality and tourism, finance and transportation. Small businesses and entrepreneurial efforts suffered extensive damages/losses. The city’s sales tax (base) plummeted. The labor force declined considerably, particularly in the health and education industries. Unemployment increased, and the city faced significant population losses due to out-migration, particularly of the African-American community. Use of mainly Hispanic workers from outside the state in the huge construction business, while the African-American residents in New Orleans remained without jobs, has raised labor issues (Entertainment, Tourism and Hospitality, U.S. Chamber of Commerce; November 8, 2005). The severity of Katrina’s destruction makes redevelopment of New Orleans, including promoting investments, small businesses and entrepreneurs, job creation and economic growth a herculean task. The incredible extent of damages due to the disaster should be a matter of great concern to residents, businesses, policy makers, and politicians for the purpose of acquiring and deploying necessary resources for a smooth and speedy recovery. In particular, it must be kept in mind that Hurricane Katrina led to small businesses lacking in planning, susceptible to cash flow reductions, a lack of inadequate access to capital for recovery, difficulties related to federal government aid, and devastated infrastructure, slowing early recovery (Runyun, March, 2006). Also, it is important that the government agencies take interest and assist affected businesses to survive, and motivate new entrepreneurs to start fresh businesses (Zolin & Kropp, January, 2007). However, previous study shows a high level of dissatisfaction with government aids among New Orleans business owners (Mancuso, June, 2006). This dissatisfaction, in turn may discourage small business owners from applying government grants, which can speed up the recovery.