Disarmed principals: Institutional resilience and the non-enforcement of delegation

Abstract

Governments across the world increasingly rely on non-state agents for managing even the most sensitive tasks that range from running critical infrastructures to protecting citizens. While private agents frequently underperform, governments as principals tend nonetheless not to enforce delegation contracts. Why? We suggest the mechanism of institutional resilience. A preexisting set of rules shapes non-enforcement through the combination of (i) its structural misfit with the delegation contract and (ii) asymmetric interdependence that favors the agent over time. To demonstrate the plausibility of our argument, we trace the political process behind Europe's largest military transport aircraft, the A400M. Governments delegated the development and production of this complex program to a private firm, Airbus. They layered a 'commercial approach' onto traditionally state-run defense industries. Yet, resilience caused these new formal rules to fail and eventually disarmed principals. Our mechanism constitutes an innovative approach by theorizing an alternative path toward dynamic continuity.