nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2008‒10‒21
nine papers chosen by
Arvi Kuura
Parnu College - Tartu University

  1. Who Decides about Change and Restructuring in Organizations? By Kieron Meagher; Andrew Wait
  2. The Wider Economic Benefit of Transport: Macro-, Meso and Micro Transport Planning and Investment Tools By OECD
  3. Experimentation, Patents, and Innovation By Daron Acemoglu; Kostas Bimpikis; Asuman Ozdaglar
  4. Bidder Asymmetry in Infrastructure Procurement: Are There any Fringe Bidders? By Antonio Estache; Atsuhi Iimi
  5. Joint Bidding in Infrastructure Procurement By Antonio Estache; Atsuhi Iimi
  6. Procurement Efficiency for Infrastructure Development and Financial Needs Reassessed By Antonio Estache; Atsuhi Iimi
  7. Service-sector competition, innovation and R&D By Gustavsson Tingvall, Patrik; Karpaty, Patrik
  8. A note on the theory of investment: Hotelling's rule under process independence By Li, Chuan-Zhong; Löfgren , Karl-Gustaf
  9. Building new frontiers: An ecosystemic approach to development, culture, education, environment and quality of life By Pilon, André Francisco

  1. By: Kieron Meagher; Andrew Wait
    Abstract: We model the determinants of who makes decisions, the principal or an agent, when there are multiple decisions. Decision making takes effort and time; and, once implemented, the expected loss from a particular decision (or project) increases with the length of time since the last decision was made. The model shows delegation is more likely as: (i) controllable uncertainty increases; (ii) uncontrollable uncertainty decreases; (iii) the number of plants in the firm decreases; (iv) the complexity of the decision increases; and (v) the importance of the decision increases. The theoretical predictions are consistent with our novel empirical results on the delegation of major organizational change decisions using workplace data. Our unique data allows us to identify who made a decision to implement a significant change, as well as key internal and external factors highlighted as potentially important in our theory. Empirically, delegation is more likely in organizations that: face a competitive product market; export; have predictable product demand; have a larger workplace; and that have fewer other workplaces in the same organization producing a similar output. We find business strategy is not related to the allocation of decision making authority; delegation, however, is associated with the use of human resource techniques such as the provision of bonuses to employees.
    Keywords: decision making authority, decentralization, delegation, competition, exports, uncertainty, principal and agent
    JEL: D23 L23 L29
    Date: 2008–09
  2. By: OECD
    Abstract: This paper summarizes and organizes presentations and discussions of the Round Table on Macro-, meso and micro infrastructure planning and assessment tools, that took place at Boston University, on 25 and 26 October 2007. The goal of the meeting was to investigate how recent research on direct and wider economic impacts of investment in transport infrastructure can be used to improve the practice of transport projects appraisal. While the potential importance of “wider benefits” is clear, it is less obvious that attempts to quantify them should be part of all projects appraisals. Timely availibilty of results of simpler approaches might approve the quality of decision-making just as much. And when wider impacts are part of appraisal, their quantification should follow consistent procedures. Policy-oriented research should focus on these procedures, not on producing general results, as the latter are thought to be irrelevant to policy, to the extent they exist.
    Date: 2008–01
  3. By: Daron Acemoglu; Kostas Bimpikis; Asuman Ozdaglar
    Abstract: This paper studies a simple model of experimentation and innovation. Our analysis suggests that patents may improve the allocation of resources by encouraging rapid experimentation and efficient ex post transfer of knowledge across firms. Each firm receives a private signal on the success probability of one of many potential research projects and decides when and which project to implement. A successful innovation can be copied by other firms. Symmetric equilibria (where actions do not depend on the identity of the firm) always involve delayed and staggered experimentation, whereas the optimal allocation never involves delays and may involve simultaneous rather than staggered experimentation. The social cost of insufficient experimentation can be arbitrarily large. Appropriately-designed patents can implement the socially optimal allocation (in all equilibria). In contrast to patents, subsidies to experimentation, research, or innovation cannot typically achieve this objective. We also show that when signal quality differs across firms, the equilibrium may involve a nonmonotonicity, whereby players with stronger signals may experiment after those with weaker signals. We show that in this more general environment patents again encourage experimentation and reduce delays.
    JEL: D83 D92 O31
    Date: 2008–10
  4. By: Antonio Estache; Atsuhi Iimi
    Abstract: Asymmetric auctions are among the most rapidly growing areas in the auction literature. The potential benefits from improved auction efficiency are expected to be enormous in public procurement auctions related to official development projects. Entrant bidders are considered a key to enhance competition in an auction and break potential collusive arrangements among incumbent bidders. Asymmetric auction theory predicts that weak (fringe) bidders would bid more aggressively when they are faced with a strong (incumbent) opponent. With ODA procurement data, it has been found that in the major infrastructure sectors, entrants submitted systematically aggressive bids in the presence of an incumbent bidder. It is also shown that high concentration of incumbents in an auction would harm auction efficiency, raising procurement costs. The results suggest that auctioneers should encourage fringe bidders to actively participate in the bidding process while maintaining the quality of the projects. It is conducive to enhancing competitive circumstances in public procurements and improving allocative efficiency.
    Keywords: Public procurement; auction theory; infrastructure development; bidder asymmetry; fringe bidders; market entry
    Date: 2008
  5. By: Antonio Estache; Atsuhi Iimi
    Abstract: To utilize public resources efficiently, it is required to take full advantage of competition in public procurement auctions. Joint bidding practices are one of the possible ways of facilitating auction competition. In theory, there are pros and cons. It may enable firms to pool their financial and experiential resources and remove the barrier to entry. On the other hand, it may reduce the degree of competition and can be used as a cover of collusive behavior. The paper empirically addresses whether joint bidding is pro- or anti-competitive in ODA procurement auctions for infrastructure projects. It is found that there is no strong evidence that joint bidding practices are compatible with competition policy, except for a few cases. In road procurements, coalitional bidding involving both local and foreign firms has been found pro-competitive. In the water and sewage sector, local joint bidding may be useful to draw out better offers from potential contractors. Joint bidding composed of only foreign companies is mostly considered anticompetitive.
    Keywords: Public procurement; auction theory; infrastructure development; joint bidding
    Date: 2008
  6. By: Antonio Estache; Atsuhi Iimi
    Abstract: Infrastructure is the engine for economic growth. The international donor community has spent about 70–100 billion U.S. dollars on infrastructure development in developing countries every year. However, it is arguable whether these financial resources are used efficiently. Without doubt a key is competition in public procurement systems. We analyze procurement data from multi- and bi-lateral official development assistance in three main infrastructure sectors: roads, electricity, and water and sanitation. It is found that the competition effect is underutilized in some areas. To take full advantage of competition, at least seven bidders are needed in the road and water sectors, while three may be enough in the power sector. It is also shown that not only competition but also auction design, especially lot division, is crucial for containing procurement costs. Based on the estimated efficient unit cost of infrastructure procurement, the annual financial needs are estimated at approximately 370 billion U.S. dollars. By promoting competition, the developing world might be able to save at most 7.6 percent of total infrastructure development costs.
    Keywords: Public procurement, auction theory, infrastructure development, corruption, governance
    Date: 2008
  7. By: Gustavsson Tingvall, Patrik (China Economic Research Center (CERC)); Karpaty, Patrik (Department of Economics)
    Abstract: The central prediction of the Aghion et al. (2005) model is an inverted U-shaped relation between innovation and competition. The model is built on the assumption of a product market and has not yet been empirically tested on service-sector firms. Using detailed firm-level data, we find the inverse U-shaped relation to hold for both small and large service-sector firms. However, non-exporting service firms deviate from the overall pattern. A more detailed breakdown of innovation expenditures shows that the inverse U-shaped pattern holds for both intramural R&D and training, but not for extramural R&D. Finally, as competition increases, small firms tend to seek more strategic alliances with competitors while large firms tend to decrease their collaboration with competitors. To some extent, the behavior of large firms can be due to their greater capacity to handle innovation projects internally and as competition increases, so does the payoff of an edge to competitors.
    Keywords: R&D; innovation; competition; service sector
    JEL: D40 L10 L60 O30
    Date: 2008–10–10
  8. By: Li, Chuan-Zhong (Department of Economics, Uppsala University); Löfgren , Karl-Gustaf (Department of Economics, Umeå University)
    Abstract: This note shows that the welll-known Hotelling rule holds for a wider class of capital investment projects with a property of process independence. Optimality behavior is therefore not a necessary condition for deriving the result.
    Keywords: Hotelling's rule; capital investment and process independence
    JEL: D10 Q20
    Date: 2008–10–10
  9. By: Pilon, André Francisco
    Abstract: Quality of life, natural and man-made environments, physical, social and mental well-being are currently undermined by all sorts of hazards and injuries; political, economical, social and cultural disarray normalise atrocious behaviours and violence throughout the world. Considering the multiple problems of difficult settlement or solution in our times, current environmental, social, cultural, educational, political and economic policies and practices are examined in view of new paradigms of growth, power, wealth, work and freedom. A multidimensional ecosystemic approach and planning model for the diagnosis and prognosis of quality of life integrate into a dynamic configuration four dimensions of being-in-the- world (intimate, interactive, social and biophysical), as they induce the events (deficits and assets), cope with consequences (desired or undesired) and reorganise for change, enhancing connexions and sealing ruptures. Development and evaluation of teaching programmes, research projects and public policies benefit from a deep understanding of the events, providing a critical comprehensive four-dimensional framework and planning model for effective and responsible action.
    Keywords: education; culture; public policies; environment; ecosystems
    JEL: Q56 O21 Q58
    Date: 2008

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