University of Michigan
Can Private Water Companies Deliver Quality?: The Role of Scale and Customer Attentiveness.
We compare the performance of private versus public water systems in terms of their compliance with water quality and treatment technique standards. We present a simple theoretical model of multi-task effort allocation and heterogeneous response to information induced external institutional pressures by firms under alternative ownership structures. Our dataset covers 52,011 municipal water systems in the U.S., with more than 200,000 observations over the period 2010-2013. Empirical estimation is conducted using a number of different specifications of violations by private and public water systems. Private systems are found to underperform public systems both in terms of procedural and outcome compliance, with private systems performing particularly poorly in procedural compliance. Performance effects are moderated by system size, however. Private systems’ likelihood of being in compliance on outcomes and on procedures improves with size, and may outperform public systems at large scale.
Dan Zhao is a rising 3rd year PhD student in Business Economics at Ross School of Business, University of Michigan, Ann Arbor. Previously earning his bachelor's degree in Quantitative Finance and Risk Management from Hong Kong, his interest now lies in environment, natural resources, and corporate social responsibility. In particular, recently he has been focusing on issues related to drinking water supply in the United States. His paper “Can Private Water Companies Deliver Quality?: The Role of Scale and Customer Attentiveness” has won the Emeritus Faculty Ph.D. Fellowship 2015 for best 2nd year paper at the Ross School of Business of University of Michigan, Katherine Terrell Best Paper prize at the Department of Business Economics and Public Policy of Ross School of Business, and NBS Impact on Pactice Award Honorable mention at the 2015 Academy of management Annual meeting, Vancouver, British Columbia.