Victimized Firms: The Impact of Collusion on Market Survival in the Greater Montreal Area’s Public Construction Sector

• In Event: Tracking Bid-Rigging and Corruption Schemes Across Space and Time

Abstract

This study expands research on white-collar-crime victimization beyond its predominant focus on individuals to also include firms, specifically those victimized by their competitors’ collusive and anti-competitive market activities. Analysis is based on bidding data from the Greater Montreal Area (GMA)’s public construction markets between 2002 and 2013, a period during which a corruption and collusion-focused scandal emerged in the province of Quebec, Canada (where the GMA is located). Quantitative analysis is based on data for over 6,000 public-construction contracts and 1,000 firms who bid on them. Survival analysis is used to demonstrate the extent to which levels of collusion, as well as other factors, sped up victimized (non-cartel) firms’ exit from the construction markets. Additionally, qualitative interviews with former leaders of victimized firms are used to gain a detailed understanding of: (1) their firms’ experiences attempting to enter a collusive market; (2) how they were victimized and prevented from winning contracts; (3) how they adapted to these setbacks; and (4) why they ultimately abandoned the market. Findings contribute to a better understanding of collusion’s impact on firm victimization, as well as the various dimensions of this victimization.

Authors

• Julian Cymbalista-Clapp, Universite de Montreal

• Carlo Morselli, University of Montreal