Management control of public and not-for-profit activities

Traditional approaches to management control usually fail for public and not-for-profit activities.¹ The type of control applicable to such activities depends on four criteria: are objectives unambiguous, outputs measurable, effects of interventions known, and is the activity repetitive? Depending on where activities stand with regard to these criteria, the control applicable corresponds to one of six different types: routine, expert, trial-and-error, intuitive, judgemental, or political control. The first three types can be represented by cybernetic models; the other three ask for more complex and less deterministic models. For these, a “political” and a “garbage-can” model are described. Key elements in the latter models are the values and the culture of the actors. As an example, the topology for management control is applied to the area of budgeting, covering regular budgeting as well as such techniques as PPBS, MBO, and ZBB and distinguishing between investment budgets, operations budgets for input centers, and operations budgets for input-output centers. Coming back to management control in general, the paper discusses the consequences of choosing the wrong model for a given management control situation: it distinguishes between “Type I” and “Type II” errors. It finally relates management control to organizational adaptation and suggests how to avoid control systems which prevent an organizational system from learning.     

An Impact Evaluation of Education, Health, and Water Supply Investments by the Bolivian Social Investment Fund

This article reviews the results of an impact evaluation ofsmall-scale rural infrastructure projects in health, water,and education financed by the Bolivian Social Investment Fund.The impact evaluation used panel data on project beneficiariesand control or comparison groups and applied several evaluationmethodologies. An experimental design based on randomizationof the offer to participate in a social fund project was successfulin estimating impact when combined with bounds estimates toaddress noncompliance issues. Propensity score matching wasapplied to baseline data to reduce observable preprogram differencesbetween treatment and comparison groups. Results for educationprojects suggest that although they improved school infrastructure,they had little impact on education outcomes. In contrast, interventionsin health clinics, perhaps because they went beyond simply improvinginfrastructure, raised utilization rates and were associatedwith substantial declines in under-age-five mortality. Investmentsin small community water systems had no major impact on waterquality until combined with community-level training, thoughthey did increase the access to and the quantity of water. Thisincrease in quantity appears to have been sufficient to generatedeclines in under-age-five mortality similar in size to thoseassociated with the health interventions.     

Do macro variables, asset markets, or surveys forecast inflation better?

Surveys do! We examine the forecasting power of four alternative methods of forecasting U.S. inflation out-of-sample: time-series ARIMA models; regressions using real activity measures motivated from the Phillips curve; term structure models that include linear, non-linear, and arbitrage-free specifications; and survey-based measures. We also investigate several methods of combining forecasts. Our results show that surveys outperform the other forecasting methods and that the term structure specifications perform relatively poorly. We find little evidence that combining forecasts produces superior forecasts to survey information alone. When combining forecasts, the data consistently places the highest weights on survey information.     

Stock Return Predictability: Is it There?

We examine the predictive power of the dividend yields for forecastingexcess returns, cash flows, and interest rates. Dividend yieldspredict excess returns only at short horizons together withthe short rate and do not have any long-horizon predictive power.At short horizons, the short rate strongly negatively predictsreturns. These results are robust in international data andare not due to lack of power. A present value model that matchesthe data shows that discount rate and short rate movements playa large role in explaining the variation in dividend yields.Finally, we find that earnings yields significantly predictfuture cash flows. (JEL C12, C51, C52, E49, F30, G12)     

Liquidity and Expected Returns: Lessons from Emerging Markets

Given the cross-sectional and temporal variation in their liquidity,emerging equity markets provide an ideal setting to examinethe impact of liquidity on expected returns. Our main liquiditymeasure is a transformation of the proportion of zero dailyfirm returns, averaged over the month. We find that it significantlypredicts future returns, whereas alternative measures such asturnover do not. Consistent with liquidity being a priced factor,unexpected liquidity shocks are positively correlated with contemporaneousreturn shocks and negatively correlated with shocks to the dividendyield. We consider a simple asset-pricing model with liquidityand the market portfolio as risk factors and transaction coststhat are proportional to liquidity. The model differentiatesbetween integrated and segmented countries and time periods.Our results suggest that local market liquidity is an importantdriver of expected returns in emerging markets, and that theliberalization process has not fully eliminated its impact.     

Competence and Governance in Strategic Collaboration: The Differential Effect of Network Structure on the Creation of Core and Noncore Technology

Whereas most of the literature on the benefits of alliances for learning and innovation has taken on a competence perspective, this paper provides an alternative integrated framework based on both a competence and governance point of view. The former focuses on the role of knowledge flows as means to access new knowledge, whereas the latter is centered around the core concepts of opportunism and freeridership in knowledge exchange situations. Although it has generally been acknowledged that competence‐based benefits of collaboration may come at a price of elevated risks due to knowledge spillovers and freeridership, such a governance view remains understudied. This paper explains how a firm's alliance network structure affects benefits as well as risks of collaboration in the context of the creation of core and noncore technology. In the case of core technology, firms attach more value to reducing governance‐based risks relative to obtaining competence‐based benefits. The opposite is found when firms develop noncore technology. This paper contributes to the existing literature by going beyond the common idea that competence and governance perspectives are either complementary or competing. Instead, this study shows that for technology‐based collaboration, they can both apply at the same time, implying a trade‐off in some cases and offering synergy in other cases. Based on an empirical test in three different industries (pharmaceuticals, chemicals, and automotive), there is support for most of our hypotheses. Direct ties have an inverted U‐shaped effect on both core and noncore technology, and the effect is relatively stronger for the former. The results furthermore show that indirect ties play a positive role in noncore technology development and that this effect is not hampered by the number of direct ties a firm has. In contrast, indirect ties seem to hamper core competence development when companies have a lot of direct ties. Finally, firms are found to benefit from nonredundancy in their alliance network in their efforts to strengthen their core technology. The joint effect of these three network characteristics leads to optimal results for core and noncore technologies under quite different alliance network structures. This poses a problem for the ambidexterity of companies, when they simultaneously try to strengthen core and noncore technologies.     

Semi-Nonparametric Estimation of an Equilibrium Search Model

We specify and estimate an equilibrium job search model with productivity differences across labour market segments. The model allows for two types of unemployment: frictional unemployment due to search frictions and structural unemployment due to wage floors. Wage floors exist because of high unemployment benefits or binding minimum wages. The productivity distribution is estimated semi-nonparametrically along the lines of Gallant-Nychka, using Hermite series approximation. We decompose the total unemployment rate and we examine the effects of changes in the minimum wage.     

Specification and testing of models estimated by quadrature

This paper proposes a test to check the specification of models with unobserved individual effects integrated out by quadrature and also a simple way of increasing the flexibility of this type of model. The results of a Monte Carlo study and an application using a well‐known dataset illustrate the finite sample properties of the proposed methods and their implementation in practice. Copyright © 2010 John Wiley & Sons, Ltd.     

How children view their travel behaviour: a case study from Flanders (Belgium)

Understanding the thoughts of contemporary children about travel and their opinions on different transport modes of transport may provide important answers for policy-makers on how to respond to current and future transport needs of children. Obviously, children do not act autonomously and their travel behaviours also strongly influence their parents’ travel behaviours. Therefore, a better understanding of children’s travel behaviours seems necessary.This paper reports the results of a large-scale, self-reporting survey (N = 2546) that was conducted to examine the concept and meaning of travel and travel behaviour of children aged between 10 and 13 years in Flanders. It was found that children are able to complete a travel diary on their own, that their travel patterns differ and that the most important part of travelling for them is the social aspect.