nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2009‒10‒10
six papers chosen by
Arvi Kuura
Parnu College - Tartu University

  1. Technology, Competition and the Time of Entry: Diversification Patterns in the Development of New Drugs By Tatiana Plotnikova
  2. Towards a Principal-Agent Based Typology of Risks in Public-Private Partnerships By André De Palma; Luc Leruth; Guillaume Prunier
  3. The Effects of the Financial Crisis on Public-Private Partnerships By Maria Delgado Coelho; Philippe Burger; Justin Tyson; I. Karpowicz
  4. Industrial research versus development investment: the implications of financial constraints By Czarnitzki, Dirk; Hottenrott, Hanna; Thorwarth, Susanne
  5. Yes, we should discount the far-distant future at its lowest possible rate: a resolution of the Weitzman-Gollier puzzle By Freeman, Mark C.
  6. Carbon leakage from the clean development mechanism By Knut Einar Rosendahl and Jon Strand

  1. By: Tatiana Plotnikova (DFG Research Training Program "The Economics of Innovative Change", Friedrich-Schiller-University Jena)
    Abstract: This paper empirically investigates the determinants of R&D diversification strategies in the drug industry. It enriches the existing literature by proposing to look at diversification factors, which reflect market and technological proximity of an R&D project towards other projects within a firm's portfolio as well as R&D competition factors. Additionally, the characteristics of R&D in the market where a new potential product is developed affiect future product choice. The analysis is performed for products-in-development data, merged with firms' patents, which allows us to separate project proximity in market niches from technological proximity. The results of empirical estimation support an idea that R&D diversification is governed by the economies of scope as well as the escape competition motive. Moreover, it is found that competition rather than spillovers in the niche where an R&D project is developed defines firms' decisions to diversify.
    Keywords: diversification, technological diversity, relatedness, competition, R&D
    JEL: O32 L25 L65
    Date: 2009–09–29
  2. By: André De Palma (ENS Cachan - Ecole Normale Supérieure de Cachan - Ecole Normale Supérieure de Cachan, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X); Luc Leruth (IMF Office in Europe - EUO); Guillaume Prunier (Ecole Polytechnique Palaiseau - (-))
    Abstract: There is a strong economic rationale for close cooperation between the public and private sectors. This has resulted in a significant increase in the demand for the provision of public services through instruments combining public and private money such as public-private partnerships (PPPs or P3s). We describe these arrangements and explore how they can be analyzed using standard tools in economics (incentives and principal-agent theory). We discuss the implications of our approach in terms of identifying risks that are often overlooked before turining to the optimal risk-sharing between the public and private partners, in particular with respect to information asymmetries in risk perceptions. This allows us to propose a typology of the risks associated with PPPs, where both internal risks (the risks associated with the contract) and external risks (those associated with the project) are considered.
    Keywords: infrastructure financing, public-private partnerships, principal-agent framework, risk classification, transportation infrastructure, value for money
    Date: 2009–09–23
  3. By: Maria Delgado Coelho; Philippe Burger; Justin Tyson; I. Karpowicz
    Abstract: The paper investigates the impact of the global financial crisis on public-private partnerships (PPPs) and the circumstances under which providing support to new and existing projects is justified. Based on country evidence, cost of and access to finance are found to be the main channels of transmission of the financial crisis, affecting in particular pipeline PPP projects. Possible measures to help PPPs during the crisis include contract extensions, output-based subsidies, revenue enhancements and step-in rights. To limit government's exposure to risk, while preserving private partner's efficiency incentives, intervention measures should be consistent with the wider fiscal policy stance, be contingent on specific circumstances, and be adequately costed and budgeted. Governments should be compensated for taking on additional risk.
    Keywords: Credit risk , Cross country analysis , Financial crisis , Financial risk , Fiscal policy , Private sector , Public enterprises , Public investment , Public sector , Risk management ,
    Date: 2009–07–13
  4. By: Czarnitzki, Dirk; Hottenrott, Hanna; Thorwarth, Susanne
    Abstract: Previous literature provided evidence on financing constraints for investment in R&D activities due to capital market imperfections and special features of R&D investments. Moreover, it has been shown that a shift in capital structure towards more debt, results in a reduction of R&D investments. This article complements this literature by compartmentalizing R&D activities in its components, R and D. In particular, we distinguish research from development as these activities do not only differ in their nature, but also to a large extent take place sequentially. Our results show that R investment is more sensitive to the firms' operating liquidity than D indicating that firms have to rely even more on internal funds for financing their research compared to development activities. Moreover, we find that (basic) research subsidy recipients' investment is less sensitive to internal liquidity.
    Keywords: Research and development,liquidity constraints,innovation policy
    JEL: O31 O32 O38
    Date: 2009
  5. By: Freeman, Mark C.
    Abstract: In this paper the author proves that the Expected Net Future Value (ENFV) criterion can lead a risk neutral social planner to reject projects that increase expected utility. By contrast, the Expected Net Present Value (ENPV) rule correctly identifies the economic value of the project. While the ENFV increases with uncertainty over future interest rates, the expected utility decreases because of the planner's desire to smooth consumption across time. This paper therefore shows that Weitzman (1998) is right and that, within his economy, the far-distant future should be discounted at its lowest possible rate.
    Keywords: Discount rates,term structure,capital budgeting,interest rate uncertainty,environmental planning
    JEL: D61 E43 G12 G31 Q51
    Date: 2009
  6. By: Knut Einar Rosendahl and Jon Strand (Statistics Norway)
    Abstract: The Clean Development Mechanism (CDM) is an offset mechanism designed to reduce the overall cost of implementing a given target for greenhouse gas (GHG) emissions in industrialized Annex B countries of the Kyoto Protocol, by shifting some of the emission reductions to Non-Annex B countries. This paper analyzes how CDM projects may lead to leakage of emissions elsewhere in Non-Annex B countries, taking into account also potential (negative) leakage effects from less emission reductions in Annex B. Leakage occurs because emissions reductions under a CDM project may affect market equilibrium in regional and/or global energy and product markets, and thereby increase emissions elsewhere. We find that overall leakage typically will be positive and sizeable, thus leading to an overall increase in global GHG emissions when CDM projects are undertaken. The leakage rate is greatest when the different fossil fuel markets are more segregated.
    Keywords: Carbon leakage; Clean Development Mechanism; Kyoto protocol
    JEL: F18 H23 Q41 Q54
    Date: 2009–09

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