Managing Risks in Complex Projects

Dealing effectively with risks in complex projects is difficult and requires management interventions that go beyond simple analytical approaches. This is one finding of a major field study into risk management practices and business processes of 35 major product developments in 17 high‐technology companies. Almost one‐half of the contingencies that occur are not being detected before they impact project performance. Yet, the risk‐impact model presented in this article shows that risk does not affect all projects equally but depends on the effectiveness of collective managerial actions dealing with specific contingencies. The results of this study discuss why some organizations are more successful in detecting risks early in the project life cycle, and in decoupling risk factors from work processes before they impact project performance. The field data suggest that effective project risk management involves an intricately linked set of variables, related to work process, organizational environment, and people. Some of the best success scenarios point to the critical importance of recognizing and dealing with risks early in their development. This requires broad involvement and collaboration across all segments of the project team and its environment, and sophisticated methods for assessing feasibilities and usability early and frequently during the project life cycle. Specific managerial actions, organizational conditions, and work processes are suggested for fostering a project environment most conducive to effective cross‐functional communication and collaboration among all stakeholders, a condition important to early risk detection and effective risk management in complex project situations.     

When natural resources run out,market knowledge steps in: Lessons on natural resource deployment from a longitudinal study in a resource-scarce region of Ethiopia

With the increasing scarcity of natural resources, the ability to maintain quality standards during resource-scarce times becomes more critical for business performance. Theories on managing resource scarcity cannot be easily tested in contexts where resources are still abundant. This study therefore turns to an emerging market context in which natural resource availability naturally varies strongly between seasons, namely, that of Ethiopian pastoralists who for many generations learned to adapt to natural resource scarcity. Central to our theory is the natural resource deployment capability, which is the ability of a business to make efficient and effective use of available resources to maintain business performance during resource-scarce times. Using three-wave longitudinal data from 120 pastoral family-based livestock businesses, the study shows that when resources are scarce or extremely scarce, market knowledge helps to better deploy the scarce natural resources, leading to higher product quality. The findings imply that businesses with a better understanding of markets have stronger natural resource deployment capability. The lesson for businesses that are confronted with approaching resource scarcity is therefore to strengthen their ability to deploy resources efficiently and effectively by strengthening their market knowledge in which such capability is rooted.     

The Stewardship Role of Analyst Forecasts,and Discretionary Versus Non-discretionary Accruals

We examine the interaction between discretionary and non-discretionary accruals in a stewardship setting. Contracting includes multiple rounds of renegotiation based on contractible accounting information and non-contractible but more timely non-accounting information. We show that accounting regulation aimed at increasing earnings quality from a valuation perspective (earnings persistence) may have a significant impact on how firms rationally respond in terms of allowing accrual discretion in order to alleviate the impact on the stewardship role of earnings. Increasing the precision of more timely non-accounting information (analyst earnings forecasts) increases the ex ante value of the firm and reduces costly earnings management. There is an optimal level of reversible non-discretionary accrual noise introduced through revenue recognition policies. Tight rules-based accounting regulation, as opposed to leaving firms more choice over non-discretionary accrual policies, may lead firms to rationally respond by inducing costly earnings management. More generally, regulating both earnings persistence and the tightness of admissible auditing policies may not result in less equilibrium earnings management.     

Beyond survival: the implementation of new forms of work organization in the UK and German steel industries

This paper outlines and analyses the major changes in work-force organization that have been introduced by British and German steel producers in the past decade, against a backcloth of retrenchment in the industry, new product development and technological change. Including multiskilling, a reduction in demarcation and team–working, these changes have had a major effect upon the composition of the work–force and the nature of work undertaken at the shopfloor level.

While these changes have had a common broad trajectory, they have been introduced at a different pace and in different forms. The contrasts are provided not only at the international level, but between plants in the same countries. The paper further outlines the response of trade unions to these changes and the implications for industrial relations at the shopfloor level.     

Can neoclassical economics become social economics?

This essay has both a general and a specific purpose. Its general purpose is to pose the question: Can neoclassical economics be social economics? Its answer to this general question is: Yes, but only if it abandons its methodological soul; that is, by abandoning methodological individualism, positivism, and ahistoricism, and expressly and systematically adopting a methodological perspective which is holistic, normative, and historical. Its specific purpose is to identify and examine the major elements in the economics of one leading figure in the historical development of neoclassical economics who self-consciously attempted to combine, to paraphrase Schumpeter, a neoclassical head with a social economics heart: Alfred Marshall.     

Sequential and multinomial logit: A nested model

A nested model is presented which has both the sequential and the multinomial logit model as special cases. This model provides a simple test to investigate the validity of these specifications. Some theoretical properties of the model are discussed. During the analysis a distribution function is derived, which, to the best of our knowledge, has not been used before. This distribution is shown to be a generalization of the typeI extreme-value distribution. Monte Carlo experiments and empirical applications of the model are presented.     

Differentiated interchange fees

Payment networks typically differentiate interchange fees across different merchant sectors. This paper shows that it is generally efficient for a regulator to leave the decision on the structure of interchange fees to payment networks.