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Unproductive entrepreneurship in US military contracting

Author

Listed:
  • Christopher J. Coyne
  • Courtney Michaluk
  • Rachel Reese

Abstract

Purpose - – US military contracting has been plagued by systematic corruption, fraud, and waste during both times of peace and war. These outcomes result from the inherent features of the US military sector which incentivize unproductive entrepreneurship. The paper aims to discuss these issues. Design/methodology/approach - – Drawing on the insights of Baumol (1990) as their base theoretical framework, the authors explore how the industrial organization of the US military sector creates incentives for unproductive entrepreneurship. Evidence from US government reports regarding US efforts in Afghanistan and Iraq is provided to illustrate the central claims. Findings - – The military sector is characterized by an entangled network of government bureaus and private firms whose existence is dependent on continued government spending. These realities, coupled with a dysfunctional procurement processes, reward unproductive behaviors during peacetime. During wartime these incentives are intensified, as significant emergency resources are injected into an already defective contracting system. The recent experiences in Afghanistan and Iraq illustrate these dynamics. Originality/value - – The authors make three main contributions. First, contrary to common treatments by economists, much military spending fails to meet the definition of a public good. Second, waste, fraud, and abuse in military contracting is a result of rules and the incentives those rules create. Third, the only way to change the situation is to change the overarching rules governing the people operating in the military sector.

Suggested Citation

  • Christopher J. Coyne & Courtney Michaluk & Rachel Reese, 2016. "Unproductive entrepreneurship in US military contracting," Journal of Entrepreneurship and Public Policy, Emerald Group Publishing Limited, vol. 5(2), pages 221-239, August.
    • Handle: RePEc:eme:jepppp:v:5:y:2016:i:2:p:221-239
    DOI: 10.1108/JEPP-12-2015-0037
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    References listed on IDEAS

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    Cited by:

    1. Marcus Matthias Keupp, 2021. "Institutions and Armed Forces," Springer Books, in: Defense Economics, chapter 0, pages 23-65, Springer.
    2. Marcus Matthias Keupp, 2021. "Defense Economics," Springer Books, Springer, number 978-3-030-73815-0, April.
    3. Alshamy, Yahya & Coyne, Christopher J. & Goodman, Nathan, 2023. "Noxious government markets: Evidence from the international arms trade," Journal of Economic Behavior & Organization, Elsevier, vol. 205(C), pages 87-99.
    4. Marcus Matthias Keupp, 2021. "Opportunities for Reform," Springer Books, in: Defense Economics, chapter 0, pages 115-134, Springer.
    5. Neto, Alcir Santos, 2020. "Limits and Possibilities of the United States Military in Post-Conflict Reconstruction and Stabilization," Thesis Commons 6syw3, Center for Open Science.
    6. Žiga Kotnik & Maja Klun & Renata Slabe-Erker, 2020. "Identification of the Factors That Affect the Environmental Administrative Burden for Businesses," Sustainability, MDPI, vol. 12(16), pages 1-15, August.

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