nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2013‒01‒26
seven papers chosen by
Arvi Kuura
Parnu College - Tartu University

  1. A Barrier Options Approach to Modeling Project Failure: The Case of Hydrogen Fuel Infrastructure By Ye Li; Peter Jan Engelen; Clemens Kool
  2. Public- Private Partnerships in Southeastern Europe: The case of Croatia By Metaxas, Theodore; Preza, Elisavet
  3. Estimating the additionality of R&D subsidies using proposal evaluation data to control for firms’ R&D intentions By Morten S. Henningsen, Torbjørn Hægeland and Jarle Møen
  4. Time Overruns as Opportunistic Behavior in Public Procurement By Chiara D’Alpaos; Michele Moretto; Paola Valbonesi; Sergio Vergalli
  5. Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration By Iossa, Elisabetta; Rey, Patrick
  6. Determinants of Greenfield Investment in Knowledge Intensive Business Services By Martin Falk
  7. Highway to success in India : the impact of the golden quadrilateral project for the location and performance of manufacturing By Ghani, Ejaz; Goswami, Arti Grover; Kerr, William R.

  1. By: Ye Li; Peter Jan Engelen; Clemens Kool
    Abstract: In this paper, we contribute to the literature by including a knock-out barrier option in a compound real option model to take account of immediate project failure, a so- called sudden death. We apply the model to the case of hydrogen infrastructure development. In our case study, we find that even for the least conservative valuation method no profitable business case can be made for the development of hydrogen as a sustainable transportation mode. However, we do provide some suggestive scenarios that plausible tax schedules can be designed to overcome the starting problems for hydrogen infrastructure development. To the extent that sudden project failure would be predominantly caused by potential reversals in political support, a cheap way to make the development of hydrogen infrastructure - and other similar projects - more attractive would be to design credible long-term political commitments to this type of development.
    Keywords: Uncertainty, real option, barrier option, investment failure, hydrogen infrastructure investment
    JEL: G32 O32 Q42
    Date: 2012–12
  2. By: Metaxas, Theodore; Preza, Elisavet
    Abstract: This paper aims to define Public Private Partnerships (PPPs) that are considered as a major approach in delivering public infrastructure projects in recent years. The paper analyses PPPs in Southeastern Europe, particularly in Croatia, describing the projects that have been achieved and the efforts of governments to promote the PPPs as alternative means of funding and bearing into consideration the formulation of the theoretical framework of PPP. The paper concludes that although the need for infrastructural projects in Croatia is huge, however the number of projects proposed are confined, according the Agency for PPPs for the approved PPP projects
    Keywords: Public – private partnership; EU; Croatia; Law; projects
    JEL: R58 R50 O52
    Date: 2012
  3. By: Morten S. Henningsen, Torbjørn Hægeland and Jarle Møen (Statistics Norway)
    Abstract: Empirical examination of whether R&D subsidies to private firms crowd out private investments has been hampered by problems related to selection. A particular worry is that research intentions and the quality of current research ideas may be correlated with the likelihood of applying for and receiving subsidies. Proposal evaluation data has been put forward as a potential remedy. Using such data from Norway, we do not find strong evidence suggesting that this type of selection creates a severe bias. Proposal evaluation grades strongly predict R&D investments and reduce selection bias in cross-sectional regressions, but there is limited variation in grades within firms over time. This suggests that unobserved project quality is largely absorbed by firm fixed effects. Our best estimate of the short-run additionality of R&D subsidies is 1.15, i.e., a one-unit increase in subsidy increases total R&D expenditure in the recipient firm by somewhat more than a unit. We demonstrate, however, that there is severe measurement error in the subsidy variable. Additionality is therefore likely to be underestimated, and we conclude that measurement errors may be a more important source of bias than selection when panel data are available.
    Keywords: Technology policy; R&D subsidies; input additionality; selection; proxy variables
    JEL: O32 L53 H25 H32
    Date: 2012–12
  4. By: Chiara D’Alpaos (University of Padua, Department of Civil, Architectural and Environmental Engineering); Michele Moretto (University of Padua, Department of Economics, Fondazione Eni Enrico Mattei and Centro Studi Levi-Cases); Paola Valbonesi (University of Padua, Department of Economics and Management); Sergio Vergalli (University of Brescia, Department of Economics and Fondazione Eni Enrico Mattei)
    Abstract: This paper considers the supplier’s strategic delivery lead time in a public procurement setting as the result of the firm’s opportunistic behaviour on the optimal investment timing. In the presence of uncertainty on construction costs, we model the supplier’s option to defer the contract’s execution as a Put Option. We include in the model both the discretion of the court of law in enforcing contractual clauses (i.e. a penalty for delays) and the "quality" of the judicial system. Then, we calibrate the model using parameters that mimic the Italian procurement for public works and calculate the maximum amount that a firm is "willing to pay" (per day) to postpone the delivery date and infringe the contract provisions. Our results show that the incentive to delay is greater the higher the construction costs and their volatility, and the weaker the penalty enforcement by the courts of law.
    Keywords: Strategic Time Overruns, Public Procurement, Real Options
    JEL: D81 H54 H57 L51
    Date: 2012–10
  5. By: Iossa, Elisabetta (DEF, University of Rome Tor Vergata, CEPR, CMPO and EIEF); Rey, Patrick (TSE,IDEI)
    Abstract: We study how career concerns affect the dynamics of incentives in a multi-period contract, when the agent’s productivity can evolve exogenously (random shocks) or improve endogenously through investment. We show that incentives are stronger and performance is higher when the contract approaches its expiry date. Contrary to common wisdom, long-term contracts may strengthen reputational effects whereas short-term contracting may be optimal when investment has persistent, long-term effects.
    Keywords: Career concerns, contract duration,contract renewal, reputation and dynamic incentives.
    Date: 2012–11
  6. By: Martin Falk
    Abstract: This study investigates the determinants of bilateral Greenfield FDI projects and flows in knowledge intensive business services from OECD/BRIC countries to the EU countries for the period 2003-2010. Greenfield FDI projects are distinguished by type of activity: (i) business services, (ii) design, development and testing activities, (iii) headquarters activities and (iv) R&D services. Another aim of this study is to provide new empirical evidence on the patterns of Greenfield investments in knowledge intensive business services over time, source country and destination country. For Austria, the number of Greenfield investments in headquarter functions remains stable over time whereas Greenfield investments in R&D and related activities declined during the sample period. The same holds true for the number of jobs generated through greenfield investments. The results using panel count data models show that wage costs, tertiary education, corporate taxes, having a common border and sharing a common language all play a significant role in determining bilateral Greenfield FDI projects in knowledge intensive services. However, the impact of corporate taxation and labour costs differs widely across the functions and does not play a role in Greenfield investments in R&D and development, design and testing services.
    Keywords: Greenfield foreign direct investment, knowledge intensive business services, headquarter functions, R&D activities, gravity equation, panel data, FDI determinants
    JEL: F23
    Date: 2012–12
  7. By: Ghani, Ejaz; Goswami, Arti Grover; Kerr, William R.
    Abstract: The infrastructure gap is one of the most significant impediments to India realizing its growth and poverty reduction potential. Although India’s transport network is one of the most extensive in the world, accessibility and connectivity are limited. Only 20 percent of the national highway network (which carries 40 percent of traffic) is four-lane and one-fourth of the rural population does not have access to an all-weather road. It is estimated that the transport sector alone will require an investment of nearly US$500 billion over the next 10 years. This paper investigates the impact of the Golden Quadrilateral highway project on the Indian organized manufacturing sector using enterprise data. The Golden Quadrilateral project upgraded the quality and width of 5,846 km of roads in India. The analysis uses a difference-in-difference estimation strategy to compare non-nodal districts based on their distance from the highway system. It finds several positive effects for non-nodal districts located 0-10 km from the Golden Quadrilateral that are not present in districts 10-50 km away, most notably higher entry rates and increases in plant productivity. These results are not present for districts located on another major highway system, the North-South East-West corridor. Improvements for portions of the North-South East-West corridor system were planned to occur at the same time as the Golden Quadrilateral but were subsequently delayed. Additional tests show that the Golden Quadrilateral project’s effect operates in part through a stronger sorting of land-intensive industries from nodal districts to non-nodal districts located on the Golden Quadrilateral network. The Golden Quadrilateral upgrades further helped spread economic activity to moderate-density districts and intermediate size cities.
    Keywords: Transport Economics Policy&Planning,Subnational Economic Development,E-Business,Housing&Human Habitats,Labor Policies
    Date: 2013–01–01

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