nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2015‒07‒11
six papers chosen by
Arvi Kuura
Tartu Ülikool

  1. Dynamic Project Selection By Arina Nikandrova; Romans Pancs
  2. Evaluative thinking for successful educational innovation By Lorna Earl; Helen Timperley
  3. Value Co-creation, Dynamic Capabilities and Customer Retention in Industrial Markets By Preikschas, Michael W.; Cabanelas, Pablo; Rüdiger, Klaus; Lampón, Jesús F.
  4. Organization of innovation and capital markets By Orman, Cuneyt
  5. The Impact of LNG Export Expansion in Queensland, with special emphasis on the effects of increased gas prices By Philip Adams
  6. Credit Rating Agency, Preliminary Ratings and Contact Disclosure By Marta Allegra Ronchetti

  1. By: Arina Nikandrova (Department of Economics, Mathematics & Statistics, Birkbeck); Romans Pancs (University of Rochester)
    Abstract: We study a normative model of an internal capital market, used by a company to choose between its two divisions’ pet projects. Each project’s value is initially unknown to all but can be dynamically learned by the corresponding division. Learning can be suspended or resumed at any time and is costly. We characterize an internal capital market that maximizes the company’s expected cash flow. This market has indicative bidding by the two divisions, followed by a spell of learning and then firm bidding, which occurs at an endogenous deadline or as soon as either division requests it.
    Keywords: Internal Capital Market, Irreversible Project Selection.
    JEL: D82 D83 G32 G31
    Date: 2015–04
  2. By: Lorna Earl; Helen Timperley
    Abstract: In this working paper, Earl and Timperley argue that evaluative thinking is a necessary component of successful innovation and involves more than measurement and quantification. Combining evaluation with innovation requires discipline in the innovation and flexibility in the evaluation. The knowledge bases for both innovation and evaluation have advanced dramatically in recent years in ways that have allowed synergies to develop between them; the different stakeholders can bring evaluative thinking into innovation in ways that capitalise on these synergies. Evaluative thinking contributes to new learning by providing evidence to chronicle, map and monitor the progress, successes, failures and roadblocks in the innovation as it unfolds. It involves thinking about what evidence will be useful during the course of the innovation activities, establishing the range of objectives and targets that make sense to determine their progress, and building knowledge and developing practical uses for the new information, throughout the trajectory of the innovation. Having a continuous cycle of generating hypotheses, collecting evidence, and reflecting on progress, allows the stakeholders (e.g., innovation leaders, policymakers, funders, participants in innovation) an opportunity to try things, experiment, make mistakes and consider where they are, what went right and what went wrong, through a fresh and independent review of the course and the effects of the innovation. This paper describes issues and approaches to each phase of the cycle. It concludes by outlining the synergies to be made, building capacity for evaluative thinking, as well as possible tensions to be addressed.<BR>Dans ce document de travail, Earl et Timperley mettent en avant l’argument que la pensée évaluative est un élément indispensable à une innovation réussie, et qu’il ne s’agit pas seulement de méthodes de mesure et de quantification. Combiner évaluation avec innovation exige de la discipline dans l’innovation et de la souplesse dans l’évaluation. Les bases de connaissances pour l’innovation comme pour l’évaluation ont vu une évolution importante ces dernières années, permettant le développement de synergies entre ces deux domaines ; les différentes parties prenantes peuvent apporter la pensée évaluative à l’innovation, en tirant parti de ces synergies. La pensée évaluative contribue aux nouveautés en matière d’apprentissage en fournissant des preuves pour documenter, recenser et mesurer le progrès, les succès, les échecs et les obstacles dans l’innovation en cours. Il s’agit de réfléchir aux preuves qui seraient utiles au cours des activités de l’innovation, et donc d’établir un champ d’objectifs et de cibles propices à déterminer le progrès de ces activités, acquérir des connaissances et développer des usages pratiques des nouvelles informations tout au long de la trajectoire de l’innovation. La génération d’hypothèses en cycle continu, le recueil de preuves, et la réflexion sur le progrès permettent aux parties prenantes (par exemple, les leaders de l’innovation, les responsables politiques, les bailleurs de fonds, et les personnes prenant part à l’innovation) d’essayer, d’expérimenter, de faire des erreurs et de considérer où sont ces erreurs, ce qui s’est bien passé ou ce qui a mal tourné, grâce à un bilan nouveau et indépendant du déroulement et des effets de l’innovation. Ce document décrit les enjeux et les approches de chacune des phases du cycle. Il conclut en indiquant les synergies qu’il reste à accomplir, ouvrant le champ à la pensée évaluative, ainsi que des tensions éventuelles à traiter.
    Date: 2015–07–03
  3. By: Preikschas, Michael W.; Cabanelas, Pablo; Rüdiger, Klaus; Lampón, Jesús F.
    Abstract: The paper analyses how value co-creation processes can influence the generation of dynamic capabilities and the retention of industrial customers. The authors explore its influence with the support of Social Exchange Theory, Resource-Based View and Service-Dominant Logic. The methodology applied was qualitative research, based on 29 semi-structured in depth interviews with owners, managing directors, and technical managers with previous experience in co-creation processes. The research was performed in four different European countries and is focused on the mobile crane industry. The findings confirm that co-creation processes promote the generation of dynamic capabilities linked to adaptation, knowledge, innovation and relationship management. In addition, the closer contact with customers and the availability of their expertise favour the development of solutions that better meet their needs, bridging the cognitive gap which often exists between partners. Regarding customer retention, the results show that there is a correlation between the co-creation processes and the customers’ predisposition to buy and cross selling. Although value co-creation is a topical subject, research in industrial marketing literature analysing the effects of co-creation processes has been scarce up to now. This paper aims to contribute to the debate by analysing how the co-creation of value can influence the generation of dynamic capabilities in companies and how it affects the retention of industrial customers. Through an eclectic approach, based on social exchange theory and the resource-based view as well as service-dominant logic, the researchers can address the dual challenge associated with the main research question: on the one hand encouraging cooperation and on the other managing relations to seek mutual benefit.
    Keywords: Value co-creation; Dynamic Capabilities; Customer Retention; Industrial Markets; co-Innovation; Qualitative Research.
    JEL: M10 M31 M39
    Date: 2014–11
  4. By: Orman, Cuneyt
    Abstract: This paper develops a theory of the firm scope where not only research but also ordinary production employees can generate inventions. Separating research from production (“specialization”) solves the two-tier agency problem of inducing simultaneously research effort and managerial truthful-reporting but is costly when capital markets are imperfect. Improvements in capital markets, therefore, promote specialization, allowing a greater number of specialized firms to be established and also enabling them to undertake innovative projects with larger potential outcomes. Moreover, this capital market improvement effect is stronger for innovative activities that are less capital-intensive and that have weaker synergies with existing production activities. The model can help us understand the explosion of small company innovation in the U.S. since late 1970s and the contribution of venture capital to this change.
    Keywords: Innovation, Organizational form, Agency problems, Technological synergies, Financial imperfections.
    JEL: D86 D2 D82 O32 G24
    Date: 2015–07
  5. By: Philip Adams
    Abstract: The large Queensland LNG projects currently under construction will begin production over the next two years. Exploiting previously unused reserves of coal seam gas, the LNG produced will be sold at an international price which far exceeds the current price of natural gas in Eastern Australia. The new exports of LNG will therefore boost Australia's exports and terms of trade, leading to increased real GDP and welfare for the national economy. But this is only one part of the overall impacts of the new projects. Through competitive pressures, the price premium received for unconventional Queensland gas will lead to increased prices for gas throughout Eastern Australia. This will increase costs of production for energy-intensive industries. For those industries (and regions) which cannot pass on the cost increases, production will fall. In this paper, using the Victoria University Regional Model (VURM), we report on simulations designed to provide a balanced assessment of the costs and benefits of the new LNG projects. Key findings are: During construction, the projects boost real GDP and national welfare, and have a positive impact on most industries and most regional economies; During the mature, production phase, the national impacts are marginal. Real GDP is stimulated slightly, while national welfare is hardly affected. Some industries gain production, particularly electricity-related sectors that benefit from favourable price-induced substitution effects. Other industries lose production, due to the adverse cost impacts of increased gas and electricity prices. Because some industries gain, while other industries lose, so some regions gain real GSP and employment (Queensland), while other regions lose (notably Victoria and South Australia). The projects will lead to higher CO2-e emissions, due to the stimulus to coal-fired electricity.
    Keywords: CGE modelling, Gas production, LNG exports, Australian economy
    JEL: C68 D58 F43 O40
    Date: 2014–11
  6. By: Marta Allegra Ronchetti
    Abstract: A recent amendment to the European Regulation on credit rating agencies requires that they disclose any issuers' request of initial reviews. This paper constructs a model of preliminary ratings and uses it to investigate the effect of contact disclosure. In this setting, the CRA issues a preliminary rating. After receiving this indicative rating, the entrepreneur has the opportunity to either purchase a full report at a cost or to remain unrated. It is shown that when there is no evidence of preliminary contact four types of equilibria can arise. In two of them the entrepreneur ignores the CRA, while in the other two the CRA either issues only positive preliminary or only negative ones and the entrepreneur is responsive to the CRA's opinion. When there is disclosure of the contact between the CRA and the entrepreneur, the CRA ends up acting overconfidently more often and for lower values of the fee. This results in more projects of lower quality, accessing the final rating stage and possibly getting funded. The payoff in the conservative case shrinks because of the reputation term, providing new incentives and causing the behavioural shift. Allowing for unrated projects partial funding emphasizes even further this tendency.
    Keywords: rating agencies, preliminary ratings, reputation, disclosure
    Date: 2015

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