nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2007‒04‒09
eight papers chosen by
Arvi Kuura
Parnu College - Tartu University

  1. Abatement and Transaction Costs of Carbon-Sink Projects Involving Smallholders By Oscar Cacho; Leslie Lipper
  2. Multinationals in their communities: A social capital approach to corporate citizenship projects By Ian Jones; Michael Pollitt; David Bek
  3. Information Sharing in Joint Research and Development By CHUMA Hiroyuki; FUJIMURA Shuzo; KAWAGOE Toshiji; MATSUBAE Taisuke; OKUNO (FUJIWARA) Masahiro; TAKIZAWA Hirokazu; WATANABE Yasunori; YOKOYAMA Izumi
  4. The Good, The Bad, and The Ugly: An Inquiry into the Causes and Nature of Credit Cycles By Kiminori Matsuyama
  5. The Role of Virtual Design Tools on Knowledge Replication and Recombination: An Empirical Investigation. By Antonino Vaccaro; Stefano Brusoni; Francisco Veloso
  6. The Price of Advice By Péter Eso; Balázs Szentes
  7. Emission trading beyond Europe : linking schemes in a post-Kyoto world By Anger, Niels
  8. Text and artefacts for creating a "World of Investment Decision-Making" : an empirical study into investment procedures By DAMBRIN, Claire; PEZET, Anne

  1. By: Oscar Cacho (University of New England); Leslie Lipper (Food and Agriculture Organization)
    Abstract: Agroforestry projects have the potential to help mitigate global warming by acting as sinks for greenhouse gasses. However, participation in carbon-sink projects may be constrained by high costs. This problem may be particularly severe for projects involving smallholders in developing countries. Of particular concern are the transaction costs incurred in developing projects, measuring, certifying and selling the carbon-sequestration services generated by such projects. This paper addresses these issues by analysing the implications of transaction and abatement costs in carbon-sequestration projects. A model of project participation is developed, which accounts for the conditions under which both buyers and sellers would be willing to engage in a carbon transaction that involves a long-term commitment. The model is used to identify critical project-design variables (minimum project size, farm price of carbon, minimum area of participating farms). A project feasibility frontier (PFF) is derived, which shows the minimum project size that is feasible for any given market price of carbon. The PFF is used to analyse how the transaction costs imposed by the Clean Development Mechanism of the Kyoto Protocol affect project feasibility.
    Keywords: Agroforestry, Climate Policy, Carbon Sequestration Costs
    JEL: Q23 Q57 O1 O13
    Date: 2007–03
  2. By: Ian Jones; Michael Pollitt; David Bek
    Abstract: The objectives of this research are to provide new ways of thinking about and measuring the extent and effectiveness of multinational company efforts to contribute to society via their corporate citizenship (CC) (or corporate social responsibility - CSR) programmes. It uses as its method of analysis the emerging literature relating to the theory and measurement of social capital. The paper summarises the findings of a forthcoming book (from Palgrave, 2007). We begin by discussing the concept of corporate citizenship in the context of the multinational. We go on to introduce the concept of social capital employed in the study. Next we summarise our case study evidence with cases from Anglo American and Diageo. Following this, we review our statistical and econometric analysis which maps the community engagements of UK multinationals in South Africa, US multinationals in Mexico and EU multinationals in Poland. We demonstrate the usefulness for analysis of social capital thinking in this context and make suggestions for future work.
    Keywords: Social capital; Corporate citizenship; Corporate Social Responsibility; Multinational companies.
    JEL: M14 Z13
    Date: 2006–12
  3. By: CHUMA Hiroyuki; FUJIMURA Shuzo; KAWAGOE Toshiji; MATSUBAE Taisuke; OKUNO (FUJIWARA) Masahiro; TAKIZAWA Hirokazu; WATANABE Yasunori; YOKOYAMA Izumi
    Abstract: In today's science-driven industries, such as the semiconductor industry, firms are increasingly engaged in across-firm research and development projects in the form of a research consortium or a strategic alliance. Those collaboration processes, however, have complex aspects due to the competing relationship of the firms in product markets and will not be successful unless the participating firms have enough incentives to reveal their private information and to exert sufficient efforts. The paper attempts to explore the conditions under which firms have enough incentives to reveal their information and/or to expend collaborative efforts. Three existing economic models are examined for this purpose. It is argued that those incentives depend upon the nature of competition in the product markets, information structure, and the way that each firm's private information affects this competition. The models examined in the paper suggest that some mechanism is necessary to evaluate private technical information of each firm and to convey it to the other firms without distortion. This conclusion coincides with the observed fact that a neutral third-party plays an indispensable role in a successful research consortium.
    Date: 2007–03
  4. By: Kiminori Matsuyama
    Abstract: This paper builds models of nonlinear dynamics in the aggregate investment and borrower net worth and uses them to study the causes and nature of endogenous credit cycles. The basic model has two types of projects: the Good and the Bad. The Bad is highly productive, but, unlike the Good, it generates less aggregate demand spillovers and contributes little to improve borrower net worth. Furthermore, it is relatively difficult to finance externally due to the agency problem. With a low net worth, the agents cannot finance the Bad, and much of the credit goes to finance the Good, even when the Bad projects are more profitable than the Good projects. This over-investment to the Good creates a boom and generates high aggregate demand spillovers. This leads to an improvement in borrower net worth, which makes it possible for the agents to finance the Bad. This shift in the composition of the credit from the Good to the Bad at the peak of the boom causes a deterioration of net worth. The whole process repeats itself. Endogenous fluctuations occur, as the Good breeds the Bad, and the Bad destroys the Good. The model is then extended to add a third type of the projects, the Ugly, which are unproductive but easy to finance. With a low net worth, the Good competes with the Ugly, creating the credit multiplier effect; with a high net worth, the Good competes with the Bad, creating the credit reversal effect. By combining these two effects, this model generates intermittency phenomena, i.e., relatively long periods of small and persistent movements punctuated intermittently by seemingly random-looking behaviors. Along these cycles, the economy exhibits asymmetric fluctuations; it experiences a long and slow process of recovery from a recession, followed by a rapid expansion, and possibly after a period of high volatility, plunges into a recession.
    Keywords: wealth-dependent borrowing constraints, heterogeneity of projects, aggregate demand spillovers, credit multiplier effect, credit reversal effect, endogenous credit cycles, nonlinear dynamics, chaos, flip and tangent bifurcations, homoclinic orbits, intermittency, asymmetric fluctuations
    JEL: E32 E44
  5. By: Antonino Vaccaro (Instituto Superior Técnico of Lisbon, Portugal and Department of Engineering and Public Policy Carnegie Mellon University, USA.); Stefano Brusoni (CESPRI & CRORA, Bocconi University, Milan, Italy.); Francisco Veloso (Department of Engineering and Public Policy, Carnegie Mellon University, USA and Universidade Católica Portuguesa – FCEE, Portugual.)
    Abstract: This paper analyzes the contribution of Virtual Design Tools (VDTs) to the processes of knowledge replication and recombination in the context of product innovation. On the basis of an in depth case study of two automotive firms engaged in two comparable new product development projects, we show that knowledge replication can occur in two distinct ways, namely through simplification and deepening of existing knowledge. By knowledge simplification we mean the selection and isolation of a specific part of the body of technological knowledge associated with the architectural functions of a multi- component system. By knowledge deepening we mean the decomposition of a knowledge packet in units of smaller dimension. We argue that the processes of knowledge simplification and knowledge deepening drive to very different innovation approaches that in turn have different competitive implications for small and large firms.
    Keywords: Virtual Design Tools, Innovation, Modularity, Knowledge Replication, Knowledge Recombination.
    JEL: O32 L25 L62
    Date: 2007–02
  6. By: Péter Eso; Balázs Szentes
    Abstract: We develop a model of consulting (advising) where the role of the consultant is that she can reveal signals to her client which refine the client’s original private estimate of the profitability of a project. Importantly, only the client can observe or evaluate these signals, the consultant cannot. We characterize the optimal contract between the consultant and her client. It is a menu consisting of pairs of transfers specifying payments between the two parties (from the client to the consultant or vice versa) in case the project is undertaken by the client and in case it is not. The main result of the paper is that in the optimal mechanism, the consultant obtains the same profit as if she could evaluate the impact of the signals (whose release she controls) on the client’s profit estimate.
    Keywords: Mechanism Design, Information Disclosure, Consulting, Advising
    JEL: C72 D49 D82 D83
  7. By: Anger, Niels
    Abstract: This paper assesses the economic impacts of linking the EU Emission Trading Scheme (ETS) to emerging schemes beyond Europe, in the presence of a post-Kyoto agreement in 2020. Simulations with a numerical multi-country model of the world carbon market show that linking the European ETS induces only marginal economic benefits: As trading is restricted to energy-intensive industries that are assigned generous initial emissions, the major compliance burden is carried by non-trading industries excluded from the linked ETS. In the presence of parallel government trading under a post-Kyoto Protocol, excluded sectors can however be substantially compensated by international trading at the country level, thus increasing the political attractiveness of the linking process. From an efficiency perspective, a desirable future climate policy regime represents a joint trading system that enables international emission trading between ETS companies and governments. While the Clean Development Mechanism (CDM) cannot alleviate the inefficiencies of linked ETS, in a parallel or joint trading regime the access to abatement options of developing countries induces large additional cost savings. Restricting CDM access via a supplementarity criterion does not significantly decrease the economic benefits from project-based emission crediting.
    Keywords: EU ETS, Emission Trading, Kyoto Protocol, Clean Development Mechanism
    JEL: D61 H21 H22 Q58
    Date: 2006
  8. By: DAMBRIN, Claire; PEZET, Anne
    Abstract: The investment procedure prescribes the stages and tests through which all investment projects must pass before being accepted or not. It governs the conditions of acceptability and constitutes a powerful device of a priori control. In this paper, we intend to understand how investment procedures enable grand ideals regarding investment to be institutionalised. In particular, over and above the assumed effectiveness and rationale of these procedures, we identify the mechanisms through which these procedures construct social roles. In this respect, this research goes beyond the procedures’ technical functions and focuses on the very form of procedures. Indeed, the form of a procedure presents two features: it is written, generally consigned to a “manual”; and it relies on “cognitive artefacts” (Norman, 1991) or “technologies of the intellect” (Goody, 1977) such as lists, tables and formulae like Discounted Cash Flow. This paper shows how this specific form takes effect during the process of institutionalisation, through which grand investment ideals (e.g. competitiveness, value creation) are transformed into concrete devices and into roles (Miller, 1991). Thanks to an enquiry conducted in 2003 and 2004, investment procedures in six large companies in a French context are analysed. It is argued that (1) the formalisation of the objectives of the procedures, as well as the definitions of investment through typologies shape the actors’ boundaries of action; (2) valuation methods based on the domination of economic-mathematical formula favour short-term over long-term reflection; (3) the setting of decision-making thresholds formalise individuals’ tasks and responsibilities. Therefore, the very form of procedures shape each phase of the institutionalisation process as defined by Hasselbladh and Kallinikos (2000) and contribute to creates a singular world – that of investment decisions.
    Keywords: procedure; investment; written text; artefacts; technologies of the intellect; institutionalisation
    JEL: D92 E22 F21 G11
    Date: 2007–04–04

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