Work

Bonding the Gap: Surety Bond Guarantee, Defaults, and Small Businesses

Year: 2024

Type: article

Abstract: ABSTRACT When small and medium‐sized enterprises (SMEs) submit bids or tender proposals for projects, they often encounter difficulties in obtaining a surety bond, which is a financial guarantee from a third party that they will meet their contractual obligations. Drawing on transaction cost economics, this study focuses on a seldom‐studied phenomenon of third‐party bond surety programs available to small businesses. For each one‐unit increase in the bond guarantee percentage the odds of default decrease, higher project amount or subcontracting exacerbates the odds of default, and geographic distance between the business and project site does not affect default. The effect sizes are practically meaningful, and the inferences are robust to alternate specifications.

Source: Managerial and Decision Economics

DOI: 10.1002/mde.4447

Author: Pankaj C. Patel

Institution: Villanova University

Language: English

Topic: Construction Project Management and Performance

Subfield: Management Science and Operations Research

Field: Decision Sciences

Domain: Social Sciences

SDGs: Decent work and economic growth, Industry, innovation and infrastructure

Open Access status: hybrid

Estimated APC paid: $2,970