Performance of Historically Underrepresented Firms in the Public-Private Sector

By Voelker, Troy A.; McDowell, William C. | Journal of Small Business Strategy, Spring 2010 | Go to article overview
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Performance of Historically Underrepresented Firms in the Public-Private Sector


Voelker, Troy A., McDowell, William C., Journal of Small Business Strategy


ABSTRACT

This study examines the performance of historically underrepresented firms, which includes women-owned businesses and socially disadvantaged businesses. We examine performance in the context of securing public contracts and compare the performance of these historically underrepresented firms to those of non-minority small and large businesses. Utilizing a sample of all contracts awarded by the Johnson Space Center, a NASA directorate located in Houston, Texas, which identified 5,676 contracts totaling approximately $157 billion, we found that small businesses received around 63% of all contracts. The results indicate that more diverse firms received higher awards than specialists and that disadvantaged firms received higher dollar awards than general small businesses. In addition, women-owned businesses neither outperformed nor performed more poorly than general small business in the dollar amounts of contracts received, and they are neither more or less specialized than general small and large businesses. A discussion, practical implications, and future research ideas are also presented.

Keywords: women owned businesses, socially disadvantaged businesses, historically underrepresented firms, public-private sector

INTRODUCTION

Strategic alliances, joint ventures, partnerships, and other interorganizational relationships between businesses have continued to grow in popularity in both business and research (Das & He, 2006; Kelly, 2007; Lee & Gongming, 2007). Small businesses have been recognized as being uniquely suited for partnerships with other organizations due to many advantages such as a simple organizational structure, a focus on growth and continuity, flexibility, and central decision making (Gelinas & Bigras, 2004). In addition, these small businesses have access to additional resources and learning opportunities that can boost performance (Beekman & Robinson, 2004).

For many small businesses, collaboration with the public sector is vital. In fact, many small businesses view public-private partnerships as their primary area of work and expertise. Public-private partnerships are gaining popularity as some research indicates that they increase innovation and opportunities for growth, and that they are the way of the future due to the interconnectedness of industries and work sectors (Richter, 2004).

Bovaird (2004) defines a public-private partnership as a working arrangement between a public sector organization and an organization outside of the public sector. The form of these partnerships can be very broad as can be the range of products and services they produce or render. One advantage of these business-to-business relationships is they can create value networks that make up a business ecosystem that can provide advantages to all parties involved (Beekman & Robinson, 2004; Sawhney & Zabin, 2002). These connections can take place in many arenas which include state and local governments, international agencies such as the UN, and even the federal government as these organizations partner with the commercial sector (Richter, 2004).

While many federal contracts go to large, publicly-traded firms, small businesses are well represented. For the past several decades, the federal government has recognized the job creation and innovation potential of small and mid-sized businesses (Audretsch, 2003). This recognition has led to increased emphasis on funding small to mid-sized businesses, thereby enhancing job creation benefits. Specific targeting of minority-owned and innovative businesses spurs the emergence and creation of such ventures (Cooper, 2003). Along these lines, public policy supporting preferential treatment of small businesses is aimed at the broader economic benefits resulting from heightened job creation and innovation.

For the federal government, the benefits accrued from the private-public partnership go beyond job creation.

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