nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2019‒03‒11
five papers chosen by
Arvi Kuura
Tartu Ülikool

  3. Unconscious Bias in Infrastructure Project Finance Decisions By Bengtsson, Wenke Johanne
  4. Real options with illiquidity of exercise opportunities By Michi Nishihara
  5. Global Value Chain Trade along the Belt andRoad and Projects Allocation By Kaku Attah Damoah; Giorgia Giovannetti; Enrico Marvasi

  1. By: Patrick Gianfaldoni (LBNC - Laboratoire Biens, Normes, Contrats - UAPV - Université d'Avignon et des Pays de Vaucluse); Lucile Manoury
    Abstract: Au cours des dix dernières années, en France, la baisse des subventions publiques et le recours aux marchés publics dans les politiques sociales ont fragilisé significativement les structures associatives de petite taille. Cette évolution institutionnelle favorise des logiques de développement territorial et ouvre parallèlement une fenêtre d'opportunité pour des acteurs philanthropiques comme les Fondations. Nous allons aborder le soutien philanthropique au développement territorial au travers de la stratégie d'intervention de deux des six délégations régionales de la Fondation de France (FdF). L'une l'a déployé sur un territoire rural, l'autre sur un territoire urbain. La FdF possède une conception du développement territorial qualifiée d'endogène, reposant sur la participation des habitants et la coopération entre différents acteurs locaux dans le but d'aider à la création d'activités et à la consolidation de liens sociaux. Nous voulons montrer que la FdF contribue aux processus d'innovation sociale territorialisée en appuyant des projets locaux novateurs et, par voie de conséquence, en renforçant les capacités d'expérimentation des acteurs associatifs implantés, de (re)création de proximités et de revitalisation des solidarités locales. Abstract During the last ten years, in France, the reduction in the public subsidies and the use to public procurement in social policies weakened significantly the small-sized associative structures. This institutional evolution favorite of the logics of territorial development and opens at the same time a window of opportunity for actors philanthropic as the Foundations. We are going to approach the philanthropic support for the territorial development through the strategy of intervention of two out of the six regional delegations of Fondation de France (FdF). One set it up on a rural territory, the other one on a urban territory. The FdF possesses a design of the territorial development considered as endogenous, based on the involvement of the inhabitants and on the cooperation between various local actors with the aim of helping in the creation of activities and in the consolidation of social links. This article shows that the FdF contributes to the processes of social territorialized innovation by supporting innovative local projects and, consequently, by strengthening the capacities of experiment of the well-established associative actors, of (re)creation of proximities and revitalization of the local solidarities. 2
    Date: 2018–06
  2. By: Anabela Marques Santos; Michele Cincera
    Abstract: Access to finance is a key driver of business activities. It can help firms to grow and innovate. However, due to market failures innovative firms are usually more financinally constrained. To improve access to financing for risky but excellent R&D and innovation investment projects, a new debt-financing instrument called “Risk Sharing Finance Facility” was created in 2007, by a joint initiative of the European Commission and the European Investment Bank. Based on a macro-economic analysis, the aim of the paper is to assess the effect of this new debt-financing instrument on enhancing private R&D expenditure. The database used covers the 28 Member States of the European Union in the period 2007-2016. Private R&D decision is estimated by a function of output growth and several R&D policy instruments. The methodological approach is based on a fixed effect model with control function method in order to correct for endogenous bias of Risk Sharing Finance. The results reveal a positive and significant effect of the new EU policy financing instrument on Private R&D expenditure and its rate of return seems to be higher than that of grants or subsidies. Furthermore, in countries where government funding for private R&D expenditure is above the average, the effect of Risk Sharing Finance shows a lower marginal effect. No evidence of significant differences concerning the size of the effect of the new debt-financing instrument is found when differentiating the level of R&D tax incentives.
    Keywords: Financing, Innovation, Risk
    Date: 2018–12
  3. By: Bengtsson, Wenke Johanne
    Abstract: A modern and functioning infrastructure is the key to maintaining the competitiveness of economies. In many countries, however, there are serious gaps in the supply of infrastructure, not least due to public budget bottlenecks. Therefore, the importance of project financing of public infrastructure has strongly increased for theory and practice. Numerous failed projects show that the success of this financing structure depends above all on realistic risk assessment. For this, project risks need to be understood in their full complexity. This includes in particular the risk of investors and lenders to misperceive the uncertainty in the decision-making situation. Heuristics and cognitive bias can lead decision makers to under- and overvalue risks and rewards. The goal of this dissertation was thus to understand the use of unrealistic optimism among investors and lenders in infrastructure project finance to find ways to make the risk assessments more realistic, optimize spending, and contribute to closing the infrastructure finance gap. To achieve this a theoretical causal bias model of individual decision maker unrealistic optimism and a predictive model of company unrealistic optimism were developed and tested with a survey among 102 relevant decision stakeholders. A major finding is that unrealistic optimism influences risk assessment in the financing of European infrastructure projects. Company related factors, personal factors, and overconfidence influence this unrealistic optimism on individual level. Unrealistic optimism on company level is further influenced by the institutional structure and objective company characteristics. The findings of the dissertation result in significant theoretical and practical contributions by showing that unrealistic optimism is at least partly situational and not strictly rooted in the head of the decision maker no matter the circumstance. Companies can thus reduce unrealistic optimism of their employees by applying the right institutional structure and team setting.
    Date: 2019–02–02
  4. By: Michi Nishihara (Graduate School of Economics, Osaka University)
    Abstract: This paper presents a framework to study real options with illiquidity of option exercise opportunities. I incorporate a constraint that the investment time is chosen from Poisson arrival times in the standard real option value (ROV) model. I derive the closed-form solution and show that illiquidity decreases the option value of waiting and the investment threshold. I extend the results to a case with different types of projects and show that an inferior project can be undertaken in the presence of illiquidity. I prove that the solution of the illiquid model converges to that of the ROV model for higher liquidity and converges to that of the net present value (NPV) model for lower liquidity. I also show that the solution agrees with the limit of the corresponding regime-switching model. The results fill the gaps in the NPV, ROV, and regime-switching models and reveal the effects of illiquidity on investment decisions.
    Keywords: real option; net present value; regime switching; liquidity; search theory
    JEL: D82 G13 G33
    Date: 2019–03
  5. By: Kaku Attah Damoah; Giorgia Giovannetti; Enrico Marvasi
    Abstract: We analyze the trade patterns among the countries involved in the Belt and Road Initiative (BRI) and investigate whether and to what extent they explain the allocation of investment projects regarding their number and value. Our findings indicate that investments tend to concentrate in countries already involved in global value chains (GVC) and especially favor suppliers of intermediate goods to China with similar sectoral specialization. At the same time, more developed countries closer to destination markets tend to attract fewer but larger investments. The BRI represents an opportunity for China to upgrade its exports and for the involved countries to join GVC productions.
    Keywords: Belt and Road, China, global value chains, trade patterns
    JEL: F14 F15 F21
    Date: 2019

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NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.