Political Connections, Incentives and Innovation: Evidence from Contract-Level Data
Year: 2015
Type: preprint
Abstract: This paper studies the relation between corporate political connections and the allocation, design, and outcomes of government contracts. Using hand-collected data on Federal procurement contracts, we find that connected firms are 10% more likely to win a contract. Connected firms receive larger contracts, with longer durations and weaker incentive structures. Politically-connected firms are also more likely to increase contract amounts and extend deadlines through contract renegotiations. While government contracts enhance firm-level innovation on average, political connections and weak contractual incentives are associated with less innovation, as measured by patents and patent citations. Overall, we show that connections between firms and politicians are associated with distortions in contract allocation and design. * Contact: Jonathan Brogaard, Foster School of Business, University of Washington, e-mail: [email protected]; Matthew Denes, Foster School of Business, University of Washington, e-mail: [email protected]; Ran Duchin, Foster School of Business, University of Washington, e-mail: [email protected]. We thank seminar participants at the SIFR Conference on Innovation and Entrepreneurship for helpful comments.
Source: SSRN Electronic Journal
Authors: Jonathan Brogaard, Matthew Denes, Ran Duchin
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1911935990