Poster Paper: Government Contracts and the Organization of Firms

Thursday, November 6, 2014
Ballroom B (Convention Center)

*Names in bold indicate Presenter

Hena Kazmi, George Mason University
Management of contracts in markets where government is the largest buyer has a unique context since the government does not necessarily seek to maximize its utility function. Instead, it usually gives away the goods and services and often sets its own demand. Government satellite contracts are usually long-term with technical uncertainties and various levels of asset specificity. Transaction cost economics treats these factors as contractual risks for opportunism ex-post due to incomplete contracts stemming from bounded rationality (Coase & Williamson). Knowledge-based theory views them as incentives to invest in tacit-knowledge and to efficiently allocate resources (Penrose). Based on the two theories of firms, this research examines the role of government contracts in the organization of firms through three questions: (1) What kind of buyer-seller relationships prevail over time for government contracts? (2) What is the structure of inter-firm network in the market for government contracting? (3) How has government’s management of contracts evolved over time due to the organization of contracts and inter-firm relations?