nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2012‒02‒01
seven papers chosen by
Arvi Kuura
Parnu College - Tartu University

  1. An Evaluation of Overseas Oil Investment Projects under Uncertainty Using a Real Options Based Simulation Model By Lei Zhu; ZhongXiang Zhang; Ying Fan
  2. Interactive Learning-driven Innovation in Upstream-Downstream Relations: Evidence from Mutual Exchanges of Engineers in Developing Economies By Tomohiro Machikita; Yasushi Ueki
  3. An Iterative Auction for Spatially Contiguous Land Management: An Experimental Analysis By Banerjee, Simanti; Kwasnica, Anthony M; Shortle, James S
  4. Commercial Revitalization in Low-Income Urban Communities: General Tax Incentives vs. Direct Incentives to Developers By Zhou, Li
  5. Asset Bubbles and Bailout By Tomohiro Hirano, Noriyuki Yanagawa
  6. Who offers tax-based business development incentives? By R. Alison Felix; James R. Hines, Jr.
  7. Resource-based theory and mergers & acquisitions success By Grill, Plina; Bresser, Rudi K. F.

  1. By: Lei Zhu (Center for Energy and Environmental Policy Research, Institute of Policy and Management, Chinese Academy of Sciences); ZhongXiang Zhang (Research Program, East-West Center); Ying Fan (Center for Energy and Environmental Policy Research, Institute of Policy and Management, Chinese Academy of Sciences)
    Abstract: This paper applies real options theory to establish an overseas oil investment evaluation model that is based on Monte Carlo simulation and is solved by the Least Squares Monte-Carlo method. To better reflect the reality of overseas oil investment, our model has incorporated not only the uncertainties of oil price and investment cost but also the uncertainties of exchange rate and investment environment. These unique features have enabled our model to be best equipped to evaluate the value of oil overseas investment projects of three oil field sizes (large, medium, small) and under different resource tax systems (royalty tax and production sharing contracts). In our empirical setting, we have selected China as an investor country and Indonesia as an investee country as a case study. Our results show that the investment risks and project values of small sized oil fields are more sensitive to changes in the uncertainty factors than the large and medium sized oil fields. Furthermore, among the uncertainty factors considered in the model, the investment risk of overseas oil investment may be underestimated if no consideration is given of the impacts of exchange rate and investment environment. Finally, as there is an important trade-off between oil resource investee country and overseas oil investor, in medium and small sized oil investment negotiation the oil company should try to increase the cost oil limit in production sharing contract and avoid the term of a windfall profits tax to reduce the investment risk of overseas oil fields.
    Keywords: Overseas Oil Investment, Project Value, Real Options, Least Squares Monte-Carlo
    JEL: Q41 Q43 Q48 G31 O13 O22 C63
    Date: 2011–11
  2. By: Tomohiro Machikita (Tomohiro Machikita Institute of Developing Economies, Inter-disciplinary Studies Center, Japan); Yasushi Ueki (Yasushi Ueki Institute of Developing Economies, Bangkok Research Center, Thailand)
    Abstract: This paper presents a simple model of the innovations that result from face-to-face communication and mutual learning in upstream-downstream relations. To examine the framework, we empirically investigate the impact of mutual knowledge exchanges on product and process innovation using a survey of manufacturing firms in Indonesia, the Philippines, Thailand and Vietnam. Evidence from interconnected firms in developing economies suggests that firms with mutual exchanges between engineers and customers achieved product innovations with new technologies and new markets. However, this is not true for simple improvement of products or process innovation. Mutual exchanges with engineers can be expected to play an important role in the case of costly innovation and in situations unknown situation to the firms.
    Date: 2011–12–01
  3. By: Banerjee, Simanti; Kwasnica, Anthony M; Shortle, James S
    Abstract: Tackling the problem of ecosystem services degradation is an important policy challenge. Different types of economic instruments have been employed by conservation agencies to meet this challenge. Notable among them are Payment for Ecosystem Services (PES) schemes that pay private landowners to change land uses to pro-environmental ones on their properties. This paper focuses on a PES scheme - an auction for the cost-efficient disbursal of government funds for selection of spatially contiguous land management projects. The auction is structured as an iterative descending price auction where every bid is evaluated on the basis of a scoring metric - a benefit cost ratio. The ecological effectiveness and economic efficiency of the auction is tested with data generated from lab experiments. These experiments use the information available to the subjects about the spatial goal as the treatment variable. Analysis indicates that the information reduces the cost-efficiency of the auction. Experience with bidding also has a negative impact on auction efficiency. The study also provides an analysis of the behavior of winners and losers at the final auction outcome as well as during the entire lifetime of the auction. Winners and losers are found to have significantly different behavior in this analysis. Behavior is also found to be significantly affected by the treatments as well.
    Keywords: Spatial Contiguity; experiments Ecosystem Services; Conservation Aucti ons
    Date: 2011–12
  4. By: Zhou, Li (University of Alberta, Department of Economics)
    Abstract: This paper proposes a commercial development model, based on Fujitas (1988) monopolistic com- petition model of spatial agglomeration, to examine storesdecisions to enter urban communities. The model focuses on commercial developers and large stores, and identi fies a potential holdup problem in the commercial development market arising because developers incur costs before negotiating with anchor tenants over pro fit sharing; the holdup problem is more likely to occur in low-income communities where the pro fitability of commercial projects is small. The model predicts that direct incentives to developers are preferred to general tax incentives for addressing this market failure.
    Keywords: urban redevelopment programs; economic agglomeration; holdup problem
    JEL: H50 H76 R58
    Date: 2012–01–01
  5. By: Tomohiro Hirano, Noriyuki Yanagawa (Faculty of Economics, University of Tokyo)
    Abstract: This paper theoretically investigates the relationship between asset price bubbles and bailout. We show that although bailout may mit-igate adverse effects of bubbles' bursting ex-post, it is more likely to generate asset price bubbles by encouraging risk-taking behaviors ex-ante. Moreover, when productivity is relatively low, the anticipated bailout accelerates bubbly booms and creates large bubbles, which re-sults in a large scale government intervention when bubbles collapse.
    Date: 2012–01
  6. By: R. Alison Felix; James R. Hines, Jr.
    Abstract: Many American communities seek to attract or retain businesses with tax abatements, tax credits, or tax increment financing of infrastructure projects (TIFs). The evidence for 1999 indicates that communities are most likely to offer one or more of these business development incentives if their residents have low incomes, if they are located close to state borders, and if their states have troubled political cultures. Ten percent greater median household income is associated with a 3.2 percent lower probability of offering incentives; ten percent greater distance from a state border is associated with a 1.0 percent lower probability of offering incentives; and a 10 percent higher rate at which government officials are convicted of federal corruption crimes is associated with a 1.2 percent greater probability of offering business incentives. TIFs are the preferred incentive of communities whose residents have household incomes between $25,000 and $75,000; whereas TIFs are much less commonly offered by communities whose residents have household incomes below $25,000. The need to finance TIFs out of incremental tax revenues may make it infeasible for many of the poorest of communities to use TIFs for local business development.
    Date: 2011
  7. By: Grill, Plina; Bresser, Rudi K. F.
    Abstract: Mergers & acquisitions (M&A) are most popular external growth strategies. While the number of M&A has been increasing during the past decades, on average, only the shareholders of target firms gain value during the acquisitions process, while acquirers do not receive abnormal positive returns. This paper analyses the impact of strategically valuable resources on the success of M&A decisions. We test complementary resource-based hypotheses regarding the value of M&A for the shareholders of both transaction partners. Our sample consists of transactions in the pharmaceutical and biotechnological industry. The results of our study show that the shareholders of both transaction partners will gain above average positive returns only when the acquirer and the target own and combine strategically valuable resources and capabilities. --
    Date: 2011

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