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The U.S. federal government has emerged as a major marketplace for business to pursue. Since 2001, the size of federal spending has more than doubled and political pressure has resulted in more of that spending going to outside companies (federal contractors) instead of government employees. Firms are increasingly viewing the government as a viable customer. Unfortunately, selling to the U.S. government is very different than selling to commercial customers.
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Josephson, Brett W., Ju-Yeon Lee, Babu John Mariadoss, and Jean L. Johnson (2019), “Uncle Sam Rising: Performance Implications of Business-to-Government Relationships,” Journal of Marketing, 83 (1), 51-72.
This article uses multimethod approaches to develop a conceptual foundation for and empirical evidence of the performance implications of business-to-government (B2G) relationships. In-depth interviews reveal unique characteristics that differentiate B2G exchanges from commercial (e.g., procurement mission; regulations and oversight; scale, scope, and planning horizon) and highlight the resultant cost–benefit trade-offs for firms in this environment. Empirical longitudinal analyses of secondary data show that a firm’s government customer emphasis (firm revenue dependence on B2G relationships) exerts a positive nonlinear effect on firm value but also increases firm risk (idiosyncratic and systematic). Government customer breadth and depth are two critical customer portfolio characteristics that moderate these effects. High government customer breadth creates more costs associated with an increasing government customer emphasis, mitigating the positive nonlinear effect on firm value. However, breadth provides diversification benefits, which alleviates the positive effect of government customer emphasis on idiosyncratic risk. Deep B2G relationships give key customer domain knowledge and insights, which help reduce the positive effect of government customer emphasis on idiosyncratic and systematic risks. The article then provides implications for marketing theory and practice.
Special thanks to Kelley Gullo, Ph.D. candidates at Duke University, for their support in working with authors on submissions to this program.
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