Toward a model of effective monitoring of IT application development and maintenance suppliers in multisourced environments

Many international corporations are now adopting multisourcing approaches to information technology (IT). Multisourcing is described as the disciplined provision and blending of services from multiple suppliers both outside the company and within the company. This approach to meeting business goals is primarily concerned with the relationship between the client organization and the multiple suppliers. To date, aspects relating to performance measurement and governance have scarcely been covered in the literature, and established IT frameworks such as control objectives for information and related technology (COBIT) provide imprecise approaches for monitoring suppliers. In this study, we intend to sharpen the existing understanding of how corporations manage and monitor suppliers in a multisourced environment and of why specific key performance indicators (KPIs) are utilized. We provide insights using a real-life example of the monitoring of IT application development and maintenance (IT ADM) suppliers and suggest monitoring dimensions based on a cross-case analysis. Based on inter-rater reliability, we further derive a minimum set of corresponding IT ADM KPIs. This study is expected to help corporations facing similar challenges by providing a set of essential KPIs to monitor IT ADM suppliers.     

Optimal payoffs under state-dependent preferences

Most decision theories, including expected utility theory, rank-dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which income is received. Optimal payoffs have their lowest outcomes when the economy is in a downturn, and this feature is often at odds with the needs of many investors. We introduce a framework for portfolio selection within which state-dependent preferences can be accommodated. Specifically, we assume that investors care about the distribution of final wealth and its interaction with some benchmark. In this context, we are able to characterize optimal payoffs in explicit form. Furthermore, we extend the classical expected utility optimization problem of Merton to the state-dependent situation. Some applications in security design are discussed in detail and we also solve some stochastic extensions of the target probability optimization problem.     

Swimming lessons,swimming ability,and the risk of drowning

Drowning is a leading cause of injury related death in many countries. Strategies to prevent these deaths depend upon characteristics of the victim and the specific circumstances surrounding the event. One preventive strategy that may be beneficial for persons of all ages and under nearly all circumstances is increased swimming ability, through some form of swimming instruction. However, a clear protective relationship between increased swimming ability and the risk of drowning has never been demonstrated. Studies focused on children, suggest that swimming ability may confer some protection, although the data are far from conclusive. This paper (1) reviews the current evidence regarding the relationship between swimming ability, swimming lessons and the risk of drowning, (2) reviews the past and present recommendations for swimming instruction and (3) outlines future research needs.     

Efficiency and equity of European education and training policies

This paper reviews empirical evidence, especially from Europe, on how education and training policies can be designed to advance both efficiency and equity. Returns to educational investments tend to decrease over the life cycle. Moreover, they are the highest for disadvantaged children at early stages and for the well-off at late stages of the life cycle. This creates complementarities between efficiency and equity at early stages and trade-offs at late stages. The paper discusses specific policies for efficiency and equity at each educational stage, ranging from early childhood education and schools over vocational and higher education to training and lifelong learning. The available evidence suggests that both efficiency and equity can be enhanced by output-oriented reforms properly designed to each stage, where the state generally sets a regulatory framework that ensures accountability and funding, and uses the forces of choice and competition to deliver best results. Designed this way, education and training systems can advance efficiency and equity at the same time. This paper is an adapted and revised version of the analytical report that accompanied the Communication and Staff Working Paper of the European Commission on “Efficiency and Equity in European Education and Training Systems” (ec.europa.eu/education/policies/2010/back_gen_en.html).     

Stability and Growth Pact: issues and lessons from political economy

The paper analyses the EU fiscal rules from a political economy perspective and derives some policy lessons. Following a literature survey, the paper stresses the importance of appropriate incentives for rule compliance in an environment where national fiscal sovereignty precludes the option of centralised enforcement. In addition, the paper stresses the importance of clear and simple rules and in particular the 3% deficit limit in anchoring expectations of fiscal discipline and facilitating public and market monitoring of public finances. This, in turn, strengthens incentive for rule compliance. Moreover, the paper discusses the interests of the most important players in European fiscal rule formation and the importance of choosing the appropriate time for initiating a reform debate.Non-technical summary The EU fiscal framework as laid down in the Maastricht Treaty and the Stability and Growth Pact (SGP, the Pact) aims to preserve fiscal sustainability while allowing room for automatic fiscal stabilisation. These two objectives are also at the heart of the ECB’s interest in the EU fiscal framework because their attainment facilitates monetary policy making in the short and long run.The paper analyses the EU fiscal rules from a political economy perspective and derives some policy lessons. The literature review of the first part reveals that fiscal rules can help solve deficit/debt biases and time inconsistency problems by constraining the behavior of policy makers. But rules can also mitigate biases if they facilitate financial market and public scrutiny of fiscal policies.Thereafter, the paper analyses the institutional environment in which EU fiscal rules are applied. It argues that EU rules reflect a “contract” amongst countries that retain sovereignty on fiscal policies. Enforcement, therefore, ultimately has to be undertaken by the contracting parties. Due to this constraint, the rules can also be characterised as “soft” law (with the 3% limit being nevertheless a much “harder” constraint than the other elements). But this does not necessarily imply that the rules are ineffective (or “dead”). Soft law reduces political transaction costs (by improving transparency and providing a forum for peer pressure). Moreover, if well-designed, such law can boost incentives towards making the rules “self-enforcing”. Evidence speaks in favour of this view: while EU fiscal rules were bent in a number of cases and compliance is undeniably of concern, major and rapid fiscal balance deteriorations have been largely prevented since the start of EMU.The paper also looks at potential trade-offs between “complex” rules where a “fine-tuned” economic rationale may boost acceptance of the rules versus simple and clear rules that allow easy monitoring. It is argued that clarity and simplicity of rules are important especially when formal enforcement is limited (“soft law”) and public monitoring becomes more important. By facilitating public and market monitoring of compliance, clear and simple rules are also more costly to breach.The benefits of “complexity”, and in particular the use of administrative discretion to fine tune the rules to country situations have limits, in particular when it comes to the excessive deficit procedure (EDP). It is argued that the 3% deficit limit and the time frame for correcting excessive deficits already provide some room to accommodate economic circumstances. The 3% limit must be clear, simple and strictly implemented to anchor expectations of fiscal discipline and to facilitate public and market monitoring. Further discretion and relaxation would conflict with this need. From this angle, other risks (e.g., efforts not materializing, structural reforms producing surprise costs etc) are hard to justify as a reason for extending deadlines to correct excessive deficits.The preventive arm of the Pact with its requirement of close-to-balance-or-in-surplus budgetary positions defines sound medium term budget positions and adjustment paths. This may be appropriately fine-tuned to address concerns about the Pact’s underlying economic rationale. For example, a symmetric application in good and bad times and less time inconsistency would be desirable.Finally, the timing of a debate on fiscal rules needs to be carefully chosen. In the EU context (and perhaps in other contexts as well), there seems to be much inherent pressure to make the rules more “complex”. Moreover, for the debate initiated in summer 2004, there was also no willingness by countries to give up sovereignty nor was there a sense of urgency to strengthen public finances via tighter rule implementation and enforcement. In such an environment, it is likely that changes to fiscal rules make them more complicated, discretionary and, thereby, potentially less enforceable.The views expressed are those of the author and not of the ECB. Comments by Vitor Gaspar, Mark Hallerberg, Steven Keuning, Jose Marin, Richard Morris, Gilles Noblet, Hedwig Ongena, Luca Onorante, Rolf Strauch, Juergen von Hagen, an anonymous referee and valuable assistance by Anna Foden are much appreciated.     

Emerging production systems in the transnationalisation of German car manufacturers: adaptation,application or innovation?

Based on case studies, this article seeks to determine whether or not German car manufacturers are exporting a 'German production model' to overseas plants and to what extent the overseas operations have a reciprocal effect on production methods in the originating country. It is argued that the most adequate analytical concept is one that emphasises interest-driven organisational learning processes.     

The minority game unpacked:

We conduct an experiment on a minority-of-three game in which each player is a team composed of three subjects. Each team can freely discuss its strategies in the game and decisions must be made via majority rule. Team discussions are recorded and their content analyzed to detect evidence of strategy co-evolution among teams playing together. Our main results show no evidence supporting the mixed strategy Nash equilibrium solution, and provide evidence more consistent with reinforcement learning models than with belief-based models. Exhibiting level-2 rationality (i.e., reasoning about others’ beliefs) is positively and significantly correlated with higher than average earnings in the game. In addition, teams that are more successful tend to become more self-centered over time, paying more attention to their own past successes than to the behavior of other teams. Finally, we find evidence of mutual adaptation over time, as teams that are more strategic induce competing teams to be more self-centered instead. Our results contribute to the understanding of coordination dynamics resting on heterogeneity and co-evolution of decision rules. In addition, they provide support at the decision process level to the validity of modeling behavior using reinforcement learning models.