Public contracts

The modern organization is “a nexus of contracts” among various stakeholders. In this two-essay study, I examine how contracts surrounding entrepreneurial firms, namely contracts with the U.S. government agencies as customers and contracts with venture capital (VC) firms as investors, interact.
In the first essay, I examine whether and how the ex-post government contracting activity of portfolio companies affects the performance of VC investments. Prior research establishes the impact of government customers on the contractor's operating performance and information quality. I find that government contracting improves the likelihood of successful exits via initial public offering (IPO) or acquisition and reduces the likelihood of a liquidation. I also find that the suppliers’ bargaining power relative to the government moderates the relationship between government contracting and VC investment exits. The increased suppliers’ bargaining power mitigates the positive relationship between government contracting and the likelihood of IPOs. The impact of government contracting on the likelihood of acquisitions and liquidations is more substantial for suppliers with greater bargaining power. The results are robust for reputable and non-reputable VC firms, alternative model specifications, and adjustments for potential endogeneity.

Public administration scholars have raised serious concerns about loss of democratic accountability when government services are outsourced to private forprofit businesses because of the very different values and missions of the two sectors. Particular concern for democratic accountability arises when administrative discretion is delegated to governments' private sector agents. Furthermore, if contractors may adversely impact individual rights or interests, or may adversely impact vulnerable populations, special democratic responsibilities arise. It is these three features of outsourcing transactions that constitute the elements of the proposed framework used in this research in order to assess need for heightened attention to democratic accountability. Some scholars argue for application of constitutional and administrative law norms to some government contractors.