The Impact of Power Distance and Uncertainty Avoidance on Real Options Exercise: Potential for Suboptimal Time Delays and Value Destruction

Real options (RO) valuation has been promoted as a way to evaluate investment opportunities and make investment decisions that takes into account the value of managerial flexibility in the face of uncertainty. Although RO enjoys a substantial body of literature considering its application and suitability in different situations, the impact of national culture on the application of RO has received little attention. Values embedded in national culture affect the behavior of managers. In particular, these values play a role in how managers frame information, communicate, and make decisions, directly and indirectly affecting behavior through cultural layers such as organizational culture. National culture, therefore, can systematically affect the application of RO, potentially leading to suboptimal outcomes. In this article, we hypothesize how 2 particularly relevant dimensions of culture, power distance and uncertainty avoidance, affect RO exercise, and estimate the magnitude suboptimality of these effects using a model we develop for the case of a put option. Our estimates suggest RO may not always be a superior valuation approach to net present value for national cultures with certain characteristics.     

Public-Private Partnerships and Prices: Evidence from Water Distribution in France

We use an original database of 5000 French local public authorities to explore the impact of organizational choice and performance as measured by consumer prices. In quantifying the impact of the choice of public-private partnerships (PPPs) on performance, we consider the related issue of the determinants of organizational choice. We estimate a switching regressions model to account for the endogeneity of organizational choice, and find that in our sample, (i) the choice by local public authorities to engage in a PPP is not random, and (ii) conditional on the choice of a PPP, consumer prices are significantly higher on average.     

E-Consulting in Virtual Negotiations

In the e-world where many of us live and work, virtual work arrangements will become increasingly commonplace. This paper reports on an exploratory study into the way in which consultants can ply their trade virtually with clients whom they never meet. US-located e-consultants provided advice to Hong Kong-located web site developers on the interface and content aspects of a website that was being developed for an international audience. Extensive analyses of the communication between the consultants and developers is undertaken, in parallel with an analysis of survey data obtained from the two sets of stakeholders. Lessons are drawn for future research and practice.     

A precautionary tale:

In the wake of the minimal disruption to computer systems arising from the Y2K Millennium Bug, there has been a notable lack of discussion about whether the huge expenditures devoted to solving the problem were justified. The most common response was that they were worth it ‘just to be on the safe side’. Furthermore, there were many related benefits in upgraded infrastructure and improved systems. We argue that in fact Y2K activity is an important if unexpected example of the ‘precautionary principle’ at work, i.e. acting in advance to ward off potential danger despite a lack of full scientific certainty about the extent of danger. It was unexpected because it was championed by corporations and governments who routinely oppose precautionary policies directed at environmental issues such as global warming. The paper outlines several reasons why Y2K was acted upon so swiftly while environmental issues are not, and explores what lessons may be learnt from the Y2K episode in terms of future strategies for dealing with environmental danger.     

Tradespace exploration of in-space communications network architectures

Making architectural decisions in long lifecycle systems is challenging because the time between system definition and end of operations can span multiple decades, resulting in shifts in stakeholder needs and major advances in technologies. Space-based communications using relay satellite constellations is one such example, requiring substantial up-front planning to define capabilities and size capacity due to the large investment of time and resources. Additionally, there are numerous viable system architectures. In this paper, we build on existing methods to develop a graph-based decision method to assess and explore architectural flexibility in the future evolution of long lifecycle systems. The tradespace graph defines edges between similar architectures, quantifies the switching cost between architectures, using graphs to analyse the potential system evolution pathways. In a test case on NASA communication satellites, we find that hosting government communications payloads, in particular optical payloads, on commercial satellites could reduce cost and increase flexibility of the NASA network.     

The evolution of world trade from 1995 to 2014: A network approach

This paper employs network analysis to study world trade from 1995 to 2014. We focus on the main connective features of the world trade network (WTN) and their dynamics. Results suggest that countries’ efforts to attain the benefits of trade have resulted in an intertwined network that is increasingly dense, reciprocal, and clustered. However, these features do not correspond to a linear aggregation of the characteristics of its constituents (trade sectors). Trade linkages are distributed homogeneously among countries, but their intensity (i.e. their value) is highly concentrated in a small set of countries. The main connective features of the WTN were not affected by the 2007–2008 international financial crisis. However, we find that the crisis marks a turning point in the evolution of the WTN from a two-group (led by the US and Germany) to a three-group (led by the US, Germany, and China) hierarchical structure.     

Tourism destination preferences of low-cost airline users in the East Midlands

Increasing demand for air travel, associated with the boom in low-cost airlines, has assisted tourism growth. Expanding opportunities from regional airports underpin an increased propensity to fly. This paper examines European tourism destination preferences and price sensitivity to fly by population segment from an air travel household survey in the East Midlands region of the United Kingdom. Of the eight typical low-cost airline destinations presented to respondents cultural locations such as Rome are preferred. Weekend break leisure trips are particularly attractive to those in employment. Price sensitivity, suggests that increasing financial pressures will have an impact upon growth, however demand for an annual holiday is important, particularly for families.     

PASSPORT OPTIONS

We relate the theory of passport options with general principles from martingale theory as well as with the theory of Bessel processcs. The calculation of the price of a passport option leads to an equality between two norms on continuous martingales. We also solve the discrete time case for passport options.     

RISK MEASURES FOR NON-INTEGRABLE RANDOM VARIABLES

We show that when a real-valued risk measure is defined on a solid, rearrangement invariant space of random variables, then necessarily it satisfies a weak compactness, also called continuity from below, property, and the space necessarily consists of integrable random variables. As a result we see that a risk measure defined for, say, Cauchy-distributed random variable, must take infinite values for some of the random variables.     

The Effects of Process and Content Facilitation Restrictiveness on GSS-Mediated Collaborative Learning

Group Support Systems (GSS) technology, extensively applied in decision-making contexts, is now seeing increased application in the educational sector. Previous work has suggested that GSS applications can have significant positive effects on both the process and the outcome of collaborative learning. This study extends this work to examine the effects of process (high/low) and content (high/low) facilitation restrictiveness on GSS-supported collaborative learning. Our results indicate that content facilitation restrictiveness has no significant bearing on student learning. Process facilitation restrictiveness, on the other hand, is more influential, with knowledge acquisition by students requiring a low restrictive environment.