Choose Your Battles Wisely: The Consequences of Protesting Government Procurement Contracts

Does Government Spending Crowd Out R&D Investment? Evidence from Government-Dependent Firms and Their Peers

“…Our paper is also related to the literature on the impact of government spending on private (capital) investment and output (key references include Ramey and Shapiro (1998), Edelberg, Eichenbaum, and Fisher (1999), Blanchard and Perotti (2002), Burnside, Eichenbaum, and Fisher (2004), Cohen et al (2011), and Kim and Nguyen (2020)). 6 The exact details of government procurement contracts are not publicly available, however, in cases where a losing bidder makes a protest, details of the original request for quotation (RFQ) are released (e.g., see Malloy (2016), Canayaz, Cornaggia, andCornaggia (2019)). Two recent cases highlight the typical structure of a government procurement contract.…”

“…Specifically, peers could face a negative employment shock due to the improved performance of GD firms causing a shift in employment within the industry leading peers to reduce R&D spending. In addition, if the reduction in peer R&D is the result of losing or challenging a bid for a government contract, then we would expect peer employment to decrease (Canayaz et al (2019)). As reported in Table A.10 in the Supplementary Material, we do not find evidence consistent with this mechanism that employment increases at GD firms or declines at their peers in response to increases in government spending.…”