Subcontracting and the Survival of Plants in the Road Construction Industry: A Panel Quantile Regression Analysis

This paper investigates how subcontracting parts of contracted work shapes entrants’ success and survival. We find that newly developed quantile regression approaches can be adapted to study survival of firms competing for government contracts in road construction. The method is applied on a data set that includes patterns of firm entry, exit and auction related information. We find an apparent increase in the business life of firms who subcontract out part of their projects. In Texas, these subcontracting effects appear to be more pronounced for firms with few or no options outside the industry, and among firms who contract out part of their work to Disadvantaged Business Enterprises.

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