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

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

Economic Analysis and Policy, 2024, vol. 81, issue C, 520-540

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.

Keywords: Bid protests; Firm performance; Government procurement; Favourtisim; Corruption; Principal–agent model; Interorganisational relationship (search for similar items in EconPapers)
JEL-codes: D22 H57 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:81:y:2024:i:c:p:520-540

DOI: 10.1016/j.eap.2023.11.031

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