The Mafia Influence in the Business Context: Infiltration of Criminal Firms in the Public Procurement Market

This study sheds light on the complex dynamics surrounding Mafia-related firms in the context of public procurements. We focus on the Italian setting as it explicitly addresses Mafia-related crimes within in the penal code. We find that criminal firms are more likely to win public procurement auctions than their non-criminal counterparts. We run a battery of tests and find that winning criminal firms exhibit distinctions from their peers, particularly in size and investment patterns. Winner criminal firms tend to participate in auctions with lower value than their non-winner counterparts. Also, we implement a propensity score matching technique to analyze Mafia and non-Mafia related firms, and the results hold. Lastly, we consider the geographical location of the public buyer, and we find that Mafia-related firms are more likely to be awarded with procurement contracts in those regions highly infiltrated by criminal organizations. Our study contributes to the literature on the impact of criminal characteristics in the allocation of public funds.