Search

FEATURES / [Profitability] Make a Stronger Business Case for Sustainability When greener products and processes add costs, managers can shift other levers to maintain profitability. By Karel Cool, Atalay Atasu, [...]

One of the vital success elements of a construction project is the accuracy of the estimation of construction cost. This study is aimed at developing a cost profile for road projects in Ghana. Pro forma was designed to retrieve historical cost data of completed road projects in Ghana. The pro forma retrieved data such as the initial budgeted cost and final construction cost of road projects, location of road projects, features of road projects, the scope of road projects (new project, renovation work, upgrade work or replacement work), type of road projects, and classification of road projects. Cost data were analyzed using descriptive analysis and probability distributions such as cumulative density functions and probability density functions. From the findings, estimates prepared for road projects in Ghana can be expected to be below the final construction cost by approximately 20% as most of the completed road projects in Ghana experience cost overrun. Key words: cost performance, cost profiling, Ghana, probability distribution, road infrastructure. L'un des elements essentiels du succes d'un projet de construction est la justesse de l'estimation des couts de construction. Cette etude vise a etablir un profil des couts pour les projets routiers au Ghana. << pro forma >> a ete concu pour recuperer des donnees historiques sur les couts des projets routiers acheves au Ghana. Les donnees pro forma recuperees telles que le cout budgete initial et le cout final de construction des projets routiers, l'emplacement, les caracteristiques et la portee des projets routiers (nouveaux projets, travaux de renovation, travaux de modernisation ou de remplacement), type et classification des projets routiers. Les donnees sur les couts ont ete examinees a l'aide d'une analyse descriptive et de distributions de probabilites comme les fonctions de densite cumulative et les fonctions de densite de probabilite. D'apres les resultats, on peut s'attendre a ce que les estimations preparees pour les projets routiers au Ghana soient inferieures d'environ 20% au cout de construction final, etant donne que la plupart des projets routiers acheves au Ghana connaissent des depassements de couts. [Traduit par la Redaction] Mots-cles: evolution des couts, profil des couts, Ghana, distribution des probabilites, infrastructure routiere., Introduction It is a general phenomenon that the construction sector plays a key part in the development of the socioeconomic growth of a country. These national socioeconomic development goals include [...]

Abstract North Korea today is a most unusual post-socialist state. Market actors and market prices are integral to economic life, but private property remains illegal, and private enterprise outside the [...]

Cost reduction plays a vital role in supply chains as businesses are asked to find innovative ways of cutting costs without sacrificing product quality. As company supply chains increase in [...]

In an electricity market, a feed-in tariff promotes attainment of a so-called 'green quota' through a system of subsidies designed to ensure renewable energy investors a 'normal rate-of-return'. However, the subsidies should track technological advances closely with the expectation that they will be phased out when the renewable technology reaches an appropriate 'maturity threshold' (i.e., grid parity). Grid parity is typically defined as the point where the levelized cost of electricity equals the price of purchasing electricity from the grid. However, it has been recognized that this definition of grid parity is flawed due to the intermittent nature of many renewable resources. We propose a definition which allows us to distinguish between grid parity and least-cost grid parity. We demonstrate that under a green quota and an emissions cap, welfare may be higher if the policy maker forgoes least-cost grid parity and phases out the feed-in system sooner rather than later. We show that while green producer cost reduction incentives under the feed-in tariff are perverse, they can be restored by offering a 'menu' of values of the policy variables and allowing full discretion in terms of the decision to engage in cost-padding, pure waste, etc. Keywords Cost Efficiency * Feed-in Tariff * Green Quota * Grid Parity * Incentives JEL Classification L50 * P60 * Q00, Introduction Concerns about carbon emissions have led to a variety of policies designed to both reduce these emissions directly and promote the deployment of renewable energy (RE) resources. For example, [...]

Buyers have two levers to enhance their supply base performance: fostering supplier competition and inducing suppliers to improve. The competition-improvement relation between the two levers has important implications for supply base design. We study a buyer facing two potential suppliers that can exert cost-reduction efforts, examining the interplay of supplier competition and supplier cost improvement under various information structures (i.e., the supplier effort is observable or unobservable) and commitment capabilities (i.e., the buyer may not commit, or may commit to a full or partial procurement mechanism, before suppliers exert efforts). We find that the two identical suppliers may choose unequal efforts, resulting in an asymmetric equilibrium outcome that enhances the performance of dual sourcing. Moreover, the competition-improvement relation depends on the effort observability. Whereas supplier competition always leads to lower improvement effort when the effort is unobservable, it may induce higher effort when the effort is observable. Thus, a trade-off between supplier competition and supplier effort is not always necessary in supply base design. Comparing-the observable- and unobservable-effort cases, we demonstrate a detrimental effect of supplier effort observability on the buyer profits. Finally, we show that more commitment expands the presence of asymmetric equilibria, enhancing dual sourcing, and the partial commitment strengthens the positive effect of competition on observable efforts while maintaining the detrimental effect of effort observability. History: Accepted by Serguei Netessine, operations management. Supplemental Material: The online supplement is available at https://doi.org/10.1287/mnsc.2016.2458. Keywords: sourcing * mechanism design * holdup * supplier competition * supplier improvement, 1. Introduction Suppliers have a profound impact on buying firms' profitability, providing increasing value in today's supply chains. A critical issue facing buyers in strategic sourcing is how to induce [...]

Transaction cost economics predicts that investments in management control will enable risky interfirm transactions. Risk is rarely eliminated, because firms trade off costs of management control and expected costs of control loss (together, the 'cost of control'). The resultant solution typically comprises a mix of control investments with residual performance and residual relational risks. Transaction cost economics also predicts that the control-residual risk trade-off will vary with the cost of control. We use survey data on 287 risky information technology transactions to test whether the control-residual risk trade-off varies predictably with two partnership-specific factors that proxy for variation in the cost of control: prior ties between exchange partners and the criticality of strategic resources to the transaction. The results support the hypotheses, providing novel evidence on trade-offs that managers make when investing in management controls while also prudently accepting some risks. History: Accepted by Mary Barth, accounting. Funding: The authors are grateful to KU Leuven for research funding and for sponsoring the survey. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2016.2435. Keywords: transaction cost economics * resource-based view * incomplete control * prior ties * strategic resources * IT procurement, 1. Introduction Transaction cost economics (TCE) explains firm boundaries and the governance and control structures that sustain risky transactions between firms (Williamson 1985). TCE predicts that if transaction risks are [...]

The effect of corporate governance may depend on a firm's financial slack. On one hand, financial slack may be spent by managers for their private benefits; a high level is likely associated with severe agency conflicts. Thus corporate governance matters more for high financial slack firms (i.e., the wasteful spending hypothesis). On the other hand, financial slack provides insurance against future uncertainties; a low level may signal deviations from the best interests of shareholders. Then corporate governance is more effective for low financial slack firms (i.e., the precautionary needs hypothesis). We differentiate the two hypotheses using the passage of antitakeover laws to identify exogenous variation in governance. Consistent with the wasteful spending hypothesis, the laws' passage has a larger negative impact on the operating and stock market performance of high financial slack firms. Further analysis shows that these firms do not invest more but become less efficient at cost management after the laws' passage. History: Accepted by Wei Jiang, finance. Funding: J. Pang gratefully acknowledges financial support from the Humanities and Social Science Promotion Foundation of Tsinghua University [Grant 2012WKZD010]. Keywords: corporate governance * financial slack * business combination laws, 1. Introduction Is corporate governance equally important for the performance of all firms? If not, for which type of firms does it matter more? These are not trivial questions, because [...]

NO ONE WANTS to be the person nitpicking how much money is being spent on paper clips. And yet, with payers willing to deny claims for the slightest deviance from [...]