Hereafter: How Crises Shape Communities Through Learning and Institutional Legacies

Abstract

Community differences in organizing capacity have been attributed to cohesion and trust among population members and from population members to organizations and have been seen as an enduring feature of communities. The experience of a crisis, and the handling of the crisis, can be seen as a test of cohesion that verifies community support of organizations or proves its absence. Using data on two bank panics 14 years apart, we explore whether a crisis event affects whether banks in a community handle the subsequent crisis through community collective action or through executing interorganizational solutions. We find that banks are less likely to seek community support when a prior financial crisis exposes the lack of trust from community members but are more likely to do so when having the experience of successfully avoiding a looming crisis. Organizational memory carries past experience into the future, and the banks that have directly experienced the absence of community trust prefer an interorganizatio...