Coordination Challenges and Performance Trade-offs Under Uncertainty: Fighting Fires Together∗

This paper investigates the effects of inter-organizational collaboration on the effectiveness of U.S. municipal fire departments. Almost all U.S. fire departments engage in the reciprocal exchange of fire services with neighboring departments. However, there is substantial variety in these relationships. First, some departments exchange help with greater frequency than others. Second, some departments manage these exchanges informally with “handshake agreements” while others use formal written contracts. I estimate whether the intensity of resources received from partners and the use of formal contracts affect property damage, injuries, and deaths. I account for the potential endogeneity of collaboration and contract choices using a combination of difference-in-differences and instrumental variables approaches. The results suggest that fire departments with an increase in realized uncertainty experience increased property damage in aggregate each year; however, this negative effect on performance is diminished by an increase in resources received from partners in that year. The results also indicate that fire departments with formal contracts experience decreased property damage in aggregate each year, but this positive effect on performance is diminished by an increase in realized uncertainty. These findings suggest that, in this setting, partner resources received facilitate adaptation to realized demand uncertainty. They also suggest that formal contracts increase coordination and control when demand is stable and regular but restrict adaptation when conditions are volatile and irregular. Trade-offs in the effects of partner resources received and formal contracts across property damage, injuries, and deaths are also explored.