Project Networks and Reallocation Externalities

Vibhuti Dhingra (), Harish Krishnan () and Juan Camilo Serpa ()
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Vibhuti Dhingra: Schulich School of Business, York University, Toronto, Ontario M3J 1P3, Canada
Harish Krishnan: University of British Columbia, Vancouver, British Columbia V6T 1Z4, Canada
Juan Camilo Serpa: Desautels Faculty of Management, McGill University, Montreal, Quebec H3A 1G5, Canada

Management Science, 2025, vol. 71, issue 11, 9213-9232

Abstract: A project involves several participants—including clients, contractors, and subcontractors—that work concurrently on multiple projects and allocate resources among them. This interdependency creates a network of otherwise-unrelated projects. We map the network of U.S. government projects involving over 150,000 participants. We show that a seemingly localized disruption, affecting only one project site, eventually causes delays across unrelated projects. This is because participants opportunistically reallocate resources into disrupted projects, at the expense of other projects, triggering a domino effect of further reallocations in the network. Thus, the costs of on-site disruptions end up being shared by multiple participants in the network, rather than being fully absorbed by the affected project. Performance-based incentives, which reward contractors for timeliness, exacerbate these externalities by encouraging self-interested resource reallocation.

Keywords: government procurement; network effects; empirical operations; project management (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:71:y:2025:i:11:p:9213-9232

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