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on Project, Program and Portfolio Management |
| By: | Bent Flyvbjerg |
| Abstract: | A major source of risk in project management is inaccurate forecasts of project costs, demand, and other impacts. The paper presents a promising new approach to mitigating such risk, based on theories of decision making under uncertainty which won the 2002 Nobel prize in economics. First, the paper documents inaccuracy and risk in project management. Second, it explains inaccuracy in terms of optimism bias and strategic misrepresentation. Third, the theoretical basis is presented for a promising new method called "reference class forecasting," which achieves accuracy by basing forecasts on actual performance in a reference class of comparable projects and thereby bypassing both optimism bias and strategic misrepresentation. Fourth, the paper presents the first instance of practical reference class forecasting, which concerns cost forecasts for large transportation infrastructure projects. Finally, potentials for and barriers to reference class forecasting are assessed. |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1302.3642&r=ppm |
| By: | Bent Flyvbjerg |
| Abstract: | This paper explores how theories of the planning fallacy and the outside view may be used to conduct quality control and due diligence in project management. First, a much-neglected issue in project management is identified, namely that the front-end estimates of costs and benefits--used in the business cases, cost-benefit analyses, and social and environmental impact assessments that typically support decisions on projects--are typically significantly different from actual ex post costs and benefits, and are therefore poor predictors of the actual value and viability of projects. Second, it is discussed how Kahneman and Tversky's theories of the planning fallacy and the outside view may help explain and remedy this situation through quality control of decisions. Third, it is described what quality control and due diligence are in the context of project management, and an eight-step procedure is outlined for due diligence based on the outside view. Fourth, the procedure is tested on a real-life, multibillion-dollar project, organized as a public-private partnership. Finally, Akerlof and Shiller's recent discussion in economics of "firing the forecaster" is discussed together with its relevance to project management. In sum, the paper demonstrates the need, the theoretical basis, a practical methodology, and a real-life example for how to de-bias project management using quality control and due diligence based on the outside view. |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1302.2544&r=ppm |
| By: | Sina T. Ates (Department of Economics, University of Pennsylvania); Felipe E. Saffie (Department of Economics, University of Pennsylvania) |
| Abstract: | In the classical literature of innovation-based endogenous growth, the main engine of long run economic growth is firm entry. Nevertheless, when projects are heterogeneous, and good ideas are scarce, a mass-composition trade off is introduced into this link: larger cohorts are characterized by a lower average quality. As one of the roles of the financial system is to screen the quality of projects, the ability of financial intermediaries to detect promising projects shapes the strength of this trade-off. In order to study this relationship, we build a general equilibrium endogenous growth model with project heterogeneity and financial screening. To illustrate the relevance of the mass and composition margins we apply this framework to two important debates in the growth literature. First, we show that corporate taxation has only a weak effect in growth, but a strong effect on firm entry, both well known empirical regularities. A second illustration studies the effects of financial development in growth. A word of caution arises: for economies that are characterized by high rates of firm creation, domestic credit should not be used as a proxy of financial development, in contrast to most of the empirical literature. |
| Keywords: | Growth, Firm Entry, Project Heterogeneity, Financial Selection, Entrepreneurship, Financial Development |
| JEL: | O3 O1 H3 |
| Date: | 2013–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:13-011&r=ppm |
| By: | Rutger P. Daems PhD (Planet Strategy Group, Brussels, Belgium); Edith L. Maes DBA (Maastricht School of Management, PO Box 1203, 6201 BE Maastricht, The Netherlands) |
| Abstract: | BACKGROUND Consistent with good corporate citizenship and the role of multinational pharmaceutical corporations in producing social goods, there is a need to clarify the concept of global burden of disease (GBD) and create performance metrics that measure a firm’s contribution to ‘saving lives’ through its current portfolio as well as identify future opportunities for enhanced product/service offering. OBJECTIVE The purpose is to develop besides a conceptual framework an analytic decision-making tool to assess and enhance a firm’s contribution to reducing the burden of disease, and to propose pathways on how this can be accomplished by optimizing the social and business returns on investment thereby maximizing the outcome for all stakeholders (i.e. patient, government, payer and firm). METHODOLOGY Product development and financial parameters are connected in an analytic decision model in combination with disease burden metrics. Through event study methodology, we subsequently explore solutions to a number of market, technology, and system issues leading to a disparity between socially and privately appropriable benefits. This is examined through a series of case studies. The GBD-based theoretical framework provides a general overview and at the same time an assessment of the social return on investment (SRI) as well as the contribution made by any specific compound or project that together constitute the company’s portfolio – now and in the future. The social outcome (SRI) is commonly expressed as Disability Adjusted Life Years (DALYs) averted and the preferred indicator of how successful the burden of disease has been reduced. Simultaneously, the business return on investment (BRI) is computed, capturing the R&D costs and risks in a modular fashion, allowing executives to calculate the profitability index for each product or project. CONCLUSION This paper contributes to the burgeoning literature on medical innovation and the ambition to broaden access to medicines. The relationship between a firm’s product outcomes and its corporate social responsibility is examined in the context of a globalizing world still dominated by different national economies and healthcare needs. To better accommodate these needs a holistic framework is required that captures the demands of those living in high, middle and low-income countries. We believe the suggested framework is able to accomplish this goal and essentially provides a more holistic product portfolio management tool that links the social and business returns of pharmaceutical innovation into a coherent analytic and decision framework, while also providing a dynamic view on how the results obtained along each of the core axes can be improved or optimized. |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:msm:wpaper:2013/07&r=ppm |
| By: | Annalisa Caloffi; Federica Rossi; Margherita Russo |
| Abstract: | We contribute to the debate on the assessment of the behavioural effects of policies by investigating which features of policy interventions in support of innovation networks, if any, improve the firms’ ability to form subsequent relationships. In order to do so, we analyse the evolution of dyadic relationships within a set of policy interventions implemented by the Italian region of Tuscany between 2002 and 2008, aimed at supporting innovation projects performed by networks of heterogeneous agents. Our analysis shows that the observed policies have changed the relational pattern of the firms, pushing them to collaborate – often in a stable way – with a number of agents. We find that a large sectoral heterogeneity among agents is generally associated with a lower probability of networking; and that the presence of specialized intermediaries increases the firms’ ability to network with universities. |
| Keywords: | Evaluation; innovation networks; dyadic relationships; behavioural effects; innovation policy |
| JEL: | D85 H43 L14 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:aal:abbswp:13-07&r=ppm |
| By: | Cassimon, Danny; Essers, Dennis |
| Abstract: | This paper critically reviews three decades of official creditors’ debt relief practice in Sub-Saharan Africa from a novel angle, i.e. along debt relief’s similarities with other aid modalities. We show that debt relief is a true ‘chameleon’ which mimics different sorts of aid, from traditional project aid to multi-year general budget support. The ‘colour’ of this chameleon depends on the embedded conditionality, alignment and the budgetary resource effect of particular debt relief interventions. We argue that characterising debt relief from an aid modality perspective is helpful in better understanding its widely varying performance track record and holds important policy lessons for designing future operations. |
| Keywords: | debt relief; HIPC; MDRI; aid modalities; budget support; Sub-Saharan Africa |
| JEL: | F34 F35 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:iob:wpaper:2013001&r=ppm |
| By: | Gunnar Pippel |
| Abstract: | In the literature on environmental innovations R&D collaborations have been identified as a critical determinant of a firm’s environmental innovation performance. However, the literature suggests that R&D collaboration is not always beneficial. Therefore, a more elaborated analysis of the effects of R&D collaborations on a firm’s environmental innovation performance is necessary. This paper investigates the impact of R&D col-laborations with different partner types such as customers, competitors, suppliers, uni-versities, governmental research institutes, consultants and other firms within the same firm group on a firm’s environmental innovation performance. In addition, this paper addresses the question of whether the diversity of R&D collaboration partners is im-portant for the environmental innovation performance. Firm-level data from 2,337 Ger-man service and manufacturing firms are used in the regression analysis. The results suggest that R&D collaboration with suppliers, customers, universities, governmental research institutes, consultants and other firms within the same firm group has a signifi-cantly positive impact on a firm’s environmental innovation performance, whereas col-laboration with competitors has no significant impact. The diversity of R&D collaboration partners has a significantly positive impact on a firm’s environmental innovation performance. |
| Keywords: | R&D, collaboration, environment, innovation |
| JEL: | O31 O32 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:iwh:dispap:5-13&r=ppm |
| By: | Muhamed Kudic; Katja Guhr |
| Abstract: | We study how firm innovativeness is related to individual cooperation events and the structure and dynamics of firms’ ego-networks employing a unique panel dataset for the full population of 233 German laser source manufactures between 1990 and 2010. Firm innovativeness is measured by yearly patent applications as well as patent grants with a two year time-lag. Network measures are calculated on the basis of 570 knowledge-related publicly funded R&D alliances. Estimation results from a panel data count model with fixed effects are suggestive of direct innovation effects due to individual cooperation events, but only as long as structural ego-network characteristics are neglected. Innovativeness is robustly related to ego-network size and ego-network brokerage whereas ego-network density reveals some surprising results. |
| Keywords: | R&D cooperation, ego-networks, firm innovativeness |
| JEL: | L25 O32 D85 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:iwh:dispap:6-13&r=ppm |
| By: | Domenico Lembo (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza"); Massimo Mecella (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza"); Mario Vacca (Universita' degli Studi di Roma "La Sapienza") |
| Abstract: | The ways of schooling and teaching is quickly changing for the continuous evolution of the surrounding world: new forms of education are required; in fact, on the one side the birth of the smart cities and the smart community ask for active citizens interacting with institutions and on the other side the enormous potentiality of ICT is modifying both the learning environments and the training models. The so called “21st century schools”, differ from the current ones in almost all the aspects: building architecture, furniture, teaching and learning methods and so on. This new kind of school are spreading all over Europe and the world and governments, which recognize the importance of an efficient, modern and up to date education system, are committed in the design and implementation of these new schools. Two problems make this scenario confusing, preventing an ordered development of this new kind of schools: first, the lack of theoretical models able to represent the “21st century school” features; second, tools to manage and design these schools and their services and activities are, when they exist, based on the old paradigms (i.e., the traditional school with classrooms, etc.) and are not still integrated in an unique tool to support the overall school working and management. In this paper, the ongoing BPM4ED (Business Process Management for EDucation) research project is described: schools are seen as organizations and the business processes management techniques are used to analyze and classify them; the final and ambitious goals of the project are the development of a design methodology for “21st century schools” and the definition, design and implementation of a new class of integrated tools, possibly including the existing ones, to manage all the school activities and services. |
| Keywords: | Business Process Modeling; Learning environments;Design Methodology |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:aeg:report:2013-02&r=ppm |