nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2015‒09‒11
eight papers chosen by
Arvi Kuura
Tartu Ülikool

  1. The Principle of the Malevolent Hiding Hand; or, the Planning Fallacy Writ Large By Bent Flyvbjerg; Cass R. Sunstein
  2. Decision Initiation, Decision Implementation, and the Allocation of Decision Rights By Randolph Sloof; Ferdinand A. von Siemens
  3. KIBS and the Dynamics of Industrial Clusters: a Complex Adaptive Systems Approach By Benoît Desmarchelier; Faridah Djellal; Faïz Gallouj
  4. An Analysis of Drivers of Mega-Events in Emerging Economies By Robert Baade; Victor Matheson
  5. New Energy Sources for Jordan: Macroeconomic Impact and Policy Considerations By Andrea Gamba
  6. Taxing Fragmented Aid to Improve Aid Efficiency By Auriol, Emmanuelle; Miquel-Florensa, Josepa
  7. Goal Bracketing and Self-Control By Alice Hsiaw
  8. Advancing the Human Capital Perspective on Value Creation by Joining Capabilities and Governance Approaches By Mahoney, Joseph T.; Kor, Yasmine

  1. By: Bent Flyvbjerg; Cass R. Sunstein
    Abstract: We identify and document a new principle of economic behavior: the principle of the Malevolent Hiding Hand. In a famous discussion, Albert Hirschman celebrated the Hiding Hand, which he saw as a benevolent mechanism by which unrealistically optimistic planners embark on unexpectedly challenging plans, only to be rescued by human ingenuity, which they could not anticipate, but which ultimately led to success, principally in the form of unexpectedly high net benefits. Studying eleven projects, Hirschman suggested that the Hiding Hand is a general phenomenon. But the Benevolent Hiding Hand has an evil twin, the Malevolent Hiding Hand, which blinds excessively optimistic planners not only to unexpectedly high costs but also to unexpectedly low net benefits. Studying a much larger sample than Hirschman did, we find that the Malevolent Hiding Hand is common and that the phenomenon that Hirschman identified is rare. This sobering finding suggests that Hirschman's phenomenon is a special case; it attests to the pervasiveness of the planning fallacy, writ very large. One implication involves the continuing need for unbiased cost-benefit analyses and other economic decision support tools; another is that such tools might sometimes prove unreliable.
    Date: 2015–09
  2. By: Randolph Sloof (University of Amsterdam, the Netherlands); Ferdinand A. von Siemens (Goethe University Frankfurt, Germany)
    Abstract: Organizations must not only take the right decisions, they must also ensure that these decisions are effectively implemented. Fama and Jensen (1983) argue that the same members of many organization are often responsible for both decision initiation and implementation. If these have social preferences, they might thus sabotage both project choices and implementation to express their discontent with the allocation of decision rights. How decisions come about also affects implementation if workers have reciprocal fairness concerns. Our experimental evidence demonstrates that the possibility to sabotage implementation leads to more delegation, but only if workers have high costs of obstructing informed decisions. We further find that the allocation of authority as such affects implementation.
    Keywords: Delegation; Implementation; Procedural Preferences; Reciprocity
    JEL: C91 D23 D86 L20
    Date: 2015–09–01
  3. By: Benoît Desmarchelier (Xi'an Jiaotong University [Chine] - Xi'an Jiaotong University); Faridah Djellal (CLERSE - Centre lillois d'études et de recherches sociologiques et économiques - CNRS - Université Lille 1 - Sciences et technologies); Faïz Gallouj (CLERSE - Centre lillois d'études et de recherches sociologiques et économiques - CNRS - Université Lille 1 - Sciences et technologies)
    Abstract: An important and highly debated question in economic geography is how to explain the dynamics of industrial clusters, i.e. their emergence and evolution through time. Two main theories are generally explored, without being confronted: the cluster life cycle theory-which mainly adopts an aggregate point of view-and the network-based approach. Although KIBS are an important actor of industrial clusters, these two theories pay little attention to them as a potential driver of clusters' dynamics. We show in this paper that properly taking KIBS into account requires considering an alternative and integrative approach that conciliates these two theories. In particular, we argue that complex adaptive systems (CAS) constitute a promising basis for such a synthesis. We then operationalize the CAS approach by studying an existing industrial cluster-Skywin (aeronautics in Wallonia region, Belgium)-within this framework. For this purpose, we use an exhaustive list of the innovation projects undertaken within this cluster between 2006 and 2014 and we build temporal innovation networks linking the agents of the cluster. It appears that Skywin's innovation networks exhibit a small-world effect. This implies that any agent who takes part into an innovation project of this cluster can easily benefit from knowledge and information generated within another ongoing project. We argue that this effect is an interesting proxy of a cluster's attractiveness and an appropriate aggregate variable for studying clusters' dynamics as it shows cluster's potential for further growth. We also demonstrate that KIBS are the main responsible for the emergence of this small-world effect in Skywin's innovation networks.
    Date: 2015–05
  4. By: Robert Baade (Department of Economics and Business, Lake Forest College); Victor Matheson (Department of Economics, College of the Holy Cross)
    Abstract: Developing countries that host mega-events such as the Olympic Games and World Cup invest enormous sums in stadiums and collateral infrastructure projects. The paper examines the motivations of countries to host these events and the typical economic outcome for those host sites lucky(?) enough be awarded the games. For both efficiency and equity reasons, these events are risk propositions at best, and they generally represent an even worse investment for developing countries than for industrialized nations.
    Keywords: sports, stadiums, development, impact analysis, Olympics, World Cup, tourism
    JEL: L83 O18 R53
    Date: 2015–09
  5. By: Andrea Gamba
    Abstract: Jordan’s initiatives to reduce its energy dependency could have substantial macroeconomic implications, but will crucially depend on the level of international oil prices in the next decade. Significant uncertainties remain regarding the feasibility of the initiatives and their potential fiscal costs, including from contingent liabilities, could be very large. Given the lead time required for such major investments, work should start now on: (i) conducting comprehensive cost-benefits analysis of these projects; (ii) addressing the challenges arising from the taxation of natural resources; and (iii) designing a fiscal framework to anchor fiscal policies if revenue from these energy projects materializes.
    Keywords: Energy resources;Energy;Fiscal policy;Fossil fuels;Middle East;Natural resource taxation;Jordan;Oil prices;oil, prices, gas, Publicly Provided Goods: Mixed Markets, General,
    Date: 2015–05–28
  6. By: Auriol, Emmanuelle; Miquel-Florensa, Josepa
    Abstract: We present a model with two donors-principals that provide funds to a unique recipient-agent. Each donor decides how to allocate his aid funds between a pooled and a donor specific unilateral project. The production function of development depends positively on the three inputs (pooled funds and each unilateral project). They are complement in the sense that the development good is only produced if a minimum of each of these inputs is provided. Both principals and the agent value the output produced with the principals' pooled and two unilateral funded projects. However the donors have a bias in favor of their own unilateral project, which leads them to over-invest in these projects compared to the investment in the pooled project. The contributions to unilateral projects are greater than the welfare maximizing levels. To correct this problem the agent establishes a tax on the implementation of unilateral projects, which acts as a protection measure against biased allocation by the principals. The optimal tax imposed by the recipient on unilateral projects varies depending on the total amount of aid provided by the donor and on the productivity of his unilateral project. We present empirical support on the donors' preferences for unilateral projects, and how allocations and fragmentation are affected by recipient's characteristics.
    Keywords: Aid fragmentation; Development; incentives; multi-principal
    JEL: D82 D86 F35 O19
    Date: 2015–09
  7. By: Alice Hsiaw (Brandeis University)
    Abstract: This paper studies the role of goal bracketing to attenuate time inconsistency. When setting non-binding goals in multi-stage project, an agent must also decide how and when to evaluate himself against such goals. In particular, he can bracket broadly by setting an aggregate goal for the entire project, or narrowly by setting incremental goals for individual stages. In the presence of loss aversion and uncertainty over outcomes, this decision involves a trade-off between motivation and comparative disutility due to ex-ante uncertainty. Narrow goal bracketing can be used as an instrument to counteract the self-control problem, while broad goal bracketing can itself generate apparently erroneous behavior such as the sunk cost fallacy. The sequential nature of decision-making introduces a differential reaction to outcome uncertainty based on its timing, which determines the optimal bracketing choice.
    Date: 2015–08
  8. By: Mahoney, Joseph T. (University of IL); Kor, Yasmine (University of SC)
    Abstract: This paper elaborates on how the human capital perspective on value creation can be advanced by joining the capabilities and governance approaches. Investments in firm-specific human capital can be an important pathway to building and enhancing a firm's core competencies. Thus, it is vital to build mechanisms and systems that encourage the development and safeguarding of these human capital-based capabilities. Our paper unpacks the notion of firm-specific human capital and presents a view on why this form of human capital especially matters in today's business context. We review pitfalls and shortcomings of a traditional shareholder model and its likely impacts on investments in firm-specific human capital. Finally, we discuss mechanisms by which the firm-specific human capital development process can be stimulated and protected.
    Date: 2014

This nep-ppm issue is ©2015 by Arvi Kuura. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.