Conclusion: A Positivist Approach to the Study of PMSCs

Doing research on the private military and security industry and assessing the impact of PMSCs’

activities in crisis and war regions is difficult because of the scarcity of and difficulty to gather empirical evidence as well as the secrecy of the industry in general (Schreier and Caparini, 2005:9).

Nonetheless, research so far has contributed enormously to a better understanding of the origins of the industry as well as its impact and provided in-depth knowledge of individual companies and conflicts PMSCs operated in.

However, the literature review showed that much of the research on PMSCs is concerned with identifying contextual factors for the evolution of the private military and security industry (Shearer, 1998; Zarate, 1998; Singer, 2003; Kinsey, 2006; Rosén, 2008; Branović, 2011; Buchan, 2011). A further large strand of the literature has explored the impact of PMSCs on issues such as authority, democracy, sovereignty of states, the legitimate use of force, security as a public good, and human rights (Avant, 2005; Leander, 2005b; Abrahamsen and Williams, 2010; Krahmann, 2010).

Furthermore, a third, more pragmatically-oriented, strand of the literature has focused on how to establish effective monitoring, accountability and prosecution mechanisms in order to minimize the risks associated with the use of PMSCs (Chesterman and Lehnardt, 2007; Cockayne et al., 2009;

Francioni and Ronzitti, 2011). Given the significant impact of PMSCs on traditional understandings of statehood and security, the scholarly debate has largely focused on normative questions.

Additionally, parts of the discussion suffer from polarization - by either condemning or praising the private military and security industry: Advocates (Shearer, 1998; Brooks, 2000) of using PMSCs emphasize the strong demand for privatized military and security provision and the industry’s role in filling the security gap. Critics (Cilliers and Mason, 1999; Musah and Fayemi, 2000), though, consider the strong reliance on PMSCs a threat for state authority and the legitimate use of force and fear the blurring of responsibilities, the weakening of democratic mechanisms and the legal grey area that surrounds PMSCs’ activities. What misses out, though, are more attempts to answer which contextual factors are conducive to a desired performance of PMSCs and which account for a stabilizing or spoiling role of PMSCs in conflict zones. To a large extent, this is certainly driven by the difficulty of finding sufficient empirical evidence. Furthermore, macro-level variables such as the

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improvement of the security situation or the progress of peace in the area of operation are influenced by too many factors such that the precise impact of a PMSCs’ performance on them seems impossible to identify.

Nevertheless, the literature offers some direction: For example, studies on the activities of PMSCs in African conflicts, in Colombia and in Afghanistan show that a rise in the number of armed groups through the additional involvement of PMSCs constitutes a destabilizing factor for the respective conflicts in the first place (Vauters and Smith, 2006; McIntyre and Weiss, 2007; Ayub et al., 2009).

Furthermore, collaborations between PMSCs and criminal networks might be facilitated by the conditions of the conflict environment itself and lead to an exacerbation or prolonging of conflicts (Musah, 2002). Besides, studies indicate that legal and regulatory mechanisms may have a crucial impact on the performances of PMSCs, particularly in terms of ethical behaviour, respect for human rights and unsatisfactory task fulfilment (Singer, 2004; Francioni and Ronzitti, 2011). Analyzing African civil wars, Akcinaroglu and Radziszewski (2012) find that competition between PMSCs is a positive decisive factor for their performance. On the other hand, Ortiz (2010a) argues that during the process of awarding a contract, competition is not always guaranteed. He shows, furthermore, that PMSCs are often awarded contracts which do not offer sufficient incentives for the provision of a good performance.³⁵

These studies suggest that the principals (in this case: states) of PMSCs could considerably affect factors which are conducive to the performance of PMSCs.³⁶ Therefore, when moving away from a purely normative perspective addressing issues like state authority or security as public good and the question why PMSCs should or should not be hired in principle, more practical aspects remain to be analyzed. For example, issues like contractual hazards, difficulties at the operational level and enforceable monitoring, accountability and prosecution mechanisms have to be understood. In other words, from the point of view that activities of PMSCs are a matter of fact of contemporary military and security missions, the identification of contextual factors which account for a stabilizing or spoiling role of PMSCs in conflict zones becomes crucial. It is of utmost importance to ask the

35 With regard to US wartime contracting, companies are often awarded cost-plus contracts. A cost-plus contract passes the agent’s costs to the principal. The agent’s profit is unaffected from its costs since it is a percentage of them. These contracts are, however, a mixed blessing: On the one hand they have the advantage that companies might rather agree to a risky contract and the government obtains support quickly. On the other hand, however, companies have no incentives in keeping costs low (in fact they have an incentive to keep them high) and, hence, extensive oversight is necessary – which in turn is almost impossible to provide in contingency operations (Carafano, 2008:76, Grasso, 2008). At the same time, it is also difficult to predict a contract’s full operating costs (in terms of time and resources) and profit margins in contingency operations. I will discuss this issue in detail in the subsequent chapter.

36 However, the literature also shows that the capability of exerting an influence strongly varies between strong and weak states. Strong and weak states generally have different motivations for hiring PMSCs (efficient government vs. inefficient security forces), different approaches to finance their services, different means to induce an optimal performance, and different feasibilities for control, regulation and prosecution. Besides, the impact of PMSCs’ activities on state authority poses fundamentally different challenges for strong and weak states (Avant, 2005).

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questions how to optimally motivate PMSCs to exercise high effort and how to identify factors that actually can be influenced by governments.

In order to answer these questions, I develop a theoretical framework, with which some practical questions related to deploying PMSCs to crisis and war regions can be tackled. Applying a principal-agent relationship in which the state (the principal) hires a PMSC (the principal-agent) to fulfil certain tasks, I am able to execute a precise and value-free analysis of the risks and benefits of hiring PMSCs.

Furthermore, identifying the exact mechanisms driving the behaviour of PMSCs in a given arrangement, I am able to identify decisive contractual factors that can be constituted by states in order to induce a desired performance by PMSCs.

However, in contrast to the existing literature using principal-agent approaches to examine state and PMSCs relations, this study focuses on designing optimal incentives schemes and the question how to motivate PMSCs to exercise high effort rather than on optimizing monitoring and oversight mechanisms (see Dickinson, 2007 and Stöber, 2007). Moreover, in contrast to previous principal-agent approaches, this dissertation entails a formal theoretical model. This is associated with certain advantages: Precision in thinking as well as clarity of argument is guaranteed. In other words, compared to purely verbal approaches, a formal model delivers precise concepts and logical validity – in particular because invalid arguments, missing or not clearly stated assumptions, and ambiguous concepts and definitions are exposed more easily. Furthermore, empirically testable predictions can be derived out of a formal model. Hence, it is possible to make a noteworthy contribution to the knowledge as well as theory building in this field of research (Fiorina, 1975).

In the following chapters, I present the historical and theoretical origins of PAT, its concepts and basic assumptions, and then apply the model to a setting in which a state delegates a military and security task to a PMSC.

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3 Principal-Agent Theory

In this chapter, I discuss the historical and theoretical origins of PAT and introduce its fundamental assumptions and concepts. The aim of this chapter is to provide the conceptual basis for the formal model presented in the subsequent chapter.