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Effects of bid protests against government agencies on firm performance: Role of interorganisational relationship

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  • Lee, Daeyong
  • Lee, Ju-Yeon
  • Josephson, Brett W.

Abstract

Government contracting officers (purchasing agents) are imperfect actors who may distort the procurement processes due to their individual preferences or biases. As a means of adjudicating this issue, firms may file legal protests against them. While previous studies analysed the effects of monitoring behaviour on procurement outcomes, the underlying mechanisms remain obscure. We overcome this limitation by leveraging interorganisational relationship mechanisms to explore how protests against government agencies affect firm performance. Using data from 2001 to 2019 encompassing bid protests and firm government procurement activities, we conduct panel regressions with firm and time fixed-effects and find that sustained protests improve firm performance. This effect is more pronounced when government agencies’ business becomes more dependent on protesting firms. In contrast, non-sustained protests had no effect on firm performance. Our findings highlight different government agencies’ reciprocating responses to firm protests and how they influence firm performance.

Suggested Citation

  • Lee, Daeyong & Lee, Ju-Yeon & Josephson, Brett W., 2024. "Effects of bid protests against government agencies on firm performance: Role of interorganisational relationship," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 520-540.
    • Handle: RePEc:eee:ecanpo:v:81:y:2024:i:c:p:520-540
    DOI: 10.1016/j.eap.2023.11.031
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    More about this item

    Keywords

    Bid protests; Firm performance; Government procurement; Favourtisim; Corruption; Principal–agent model; Interorganisational relationship;
    All these keywords.

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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