A Critical Discussion and Practical Recommendations on Some Issues Relevant to the Nonprobabilistic Treatment of Uncertainty in Engineering Risk Assessment

Models for the assessment of the risk of complex engineering systems are affected by uncertainties due to the randomness of several phenomena involved and the incomplete knowledge about some of the characteristics of the system. The objective of this article is to provide operative guidelines to handle some conceptual and technical issues related to the treatment of uncertainty in risk assessment for engineering practice. In particular, the following issues are addressed: (1) quantitative modeling and representation of uncertainty coherently with the information available on the system of interest; (2) propagation of the uncertainty from the input(s) to the output(s) of the system model; (3) (Bayesian) updating as new information on the system becomes available; and (4) modeling and representation of dependences among the input variables and parameters of the system model. Different approaches and methods are recommended for efficiently tackling each of issues (1)?(4) above; the tools considered are derived from both classical probability theory as well as alternative, nonfully probabilistic uncertainty representation frameworks (e.g., possibility theory). The recommendations drawn are supported by the results obtained in illustrative applications of literature.     

Disentangling the effects of organizational controls on innovation

The strategy and innovation literatures argue that organizational competitiveness is contingent upon firms simultaneously pursuing both process and product innovations. A firm’s control system plays a fundamental role in this regard by managing, motivating, and coordinating employees’ behaviors for the development of its innovative capabilities. Research suggests that in order to develop successful innovation, management must use controls that align employees’ interests with those of the organization while simultaneously allowing employee autonomy to encourage creativity. These disparate functions lead to the control–autonomy dilemma. We argue that managers can address this dilemma by recognizing that the effect of controls on innovation outcomes depends, in part, on the controls’ enabling features and the type of commitment they inspire. Our findings show that employee development, which is the focus of input controls, has a direct effect on process innovation-related behaviors while specified goals, the emphasis of output controls, have a direct effect on product innovation-related behaviors. It is only through employees’ perceptions of managerial support that input controls increase product innovation-related behaviors and output controls increase process innovation-related behaviors.     

Money, real output, and deficit effects of coffee booms in Colombia

This paper develops a Vector Error Correction (VEC) model and uses the recently developed technique of ‘generalized’ impulse response analysis to test the empirical relationships in the Colombian economy between coffee revenues and a set of macro variables. We find that coffee price (revenue) shocks have exerted an important influence on money growth, inflation, and real exchange rates, and the direction of these effects are in line with some of the predictions of traditional Dutch Disease type models. The major difference between our results and the results of Dutch Disease type models arise in the effects of coffee booms on real output. We find that in the time horizon of 5 years after the boom, real output has increased in response to the effects of the coffee boom. The finding that coffee booms can result in positive long-run output effects is an important finding since it contradicts the traditional conclusion of Dutch Disease type models which envision an adverse long-run effect on output. We also find that the long-run effect of coffee booms is to reduce both current account and government deficits. These results illustrate strikingly that the term “Dutch Disease” is an unfortunately pejorative term that obscures the fact that coffee booms need not be viewed as a “disease” but as an extraordinary opportunity to strengthen internal and external balances.     

Human Capital Accumulation,Social Mobility and Migrations

This paper studies the effects of migrations on growth and income distribution when social mobility is imperfect. Workers migrate in response to differences in expected wages between home and a foreign country, but their choice depends also whether they qualified themselves as skilled workers by accumulating human capital or not. Such an activity has a cost, which depends on each agent’s family background: sons of skilled workers have lower human capital accumulation costs. The effects of labour migrations on per capita income depend only on the degree of social mobility: if there is a difference in the cost of accumulating human capital for the sons of educated and non-educated people, migrations reduce total earnings of unskilled workers in the receiving country, and increase those of skilled workers.     

Plurality of Worlds, Plurality of Risks

Risk management decisions are not made only on the basis of expert risk assessment. In numerous instances, public controversy erupts, questioning the results of previous risk assessment procedures and shaping the development of risk management episodes. This article presents a case study of risk management in the context of a 1980s controversy over aerial spraying against a spruce budworm epidemic in Quebec and draws some general conclusions concerning the relationship between risk analysis and public controversies. Actors in public controversies define risks more broadly than risk assessment experts. Moreover, public controversies only partly concern issues of risk. They are first and foremost debates about social choices in which actors carry with them a multidimensional social experience of technology, trust, credibility and decision-making institutions. This experience contributes to the construction of a plurality of emergent representations of what is at stake in a controversy, referred to in this paper as "worlds of relevance." Analysis shows that in any given public controversy, there are not just two parties arguing against each other. Rather, several "worlds of relevance" can be found that link, in a variety of ways, a variety of entities not necessarily shared by all these worlds. Each "world of relevance" presents a different definition of what the issues and the stakes of the controversy are. Risks are only part of the picture, and they are embedded in "worlds of relevance" from which they take their significance. The successful management of a controversy entails the association of entities from different worlds.     

Compatible prior distributions for directed acyclic graph models

Summary.  The application of certain Bayesian techniques, such as the Bayes factor and model averaging, requires the specification of prior distributions on the parameters of alternative models. We propose a new method for constructing compatible priors on the parameters of models nested in a given directed acyclic graph model, using a conditioning approach. We define a class of parameterizations that is consistent with the modular structure of the directed acyclic graph and derive a procedure, that is invariant within this class, which we name reference conditioning.     

On the sustainability of bargaining solutions in family decision models

This paper analyses the sustainability of family bargaining agreements by developing a non-cooperative game between two spouses with symmetric preferences. To that end, we develop, by using a general utility function, a repeated non-cooperative game involving two players with symmetric preferences, where the characterization of a Nash sub-game perfect equilibrium allows us to demonstrate that the spouse with the greater bargaining power has a greater incentive to reach an agreement. This result is also reproduced by using a particular example of linear preferences in consumption. However, the influence of the bargaining power on the sustainability of a bargaining solution depends on the specification of the individual preferences, as well as the degree of altruism between the spouses.

Internationalization, innovation and entrepreneurship: business models for new technology-based firms

New technology-based firms, particularly those that develop their business around a new technological platform, are likely to be impacted by globalization, in terms of both pace of innovation and pressure of competition. For these firms, strategic decisions and growth processes are characterized by a deep inter-relationship amongst the processes of internationalization, innovation and entrepreneurship; processes which have tended to be examined independently in distinct bodies of literature. In practice strategic decisions concern each of these processes and address issues such as organizational boundaries, location of the operational activities, what activities to focus on and selection of value partners. The business model by which firms operate needs also to accommodate the spatial dimensions indicated by globalization; and the emergence of global technology markets. Little is known to date about the extent to which business models accommodate or are adapted to internationalization, innovation and entrepreneurship. This paper presents a review of the business model literature from which a generic business model framework is derived, identifying and introducing the main elements of these processes as the firms?? focus, modus and locus. This contribution makes a clear distinction between the business model and the strategy concepts and highlights the relevance of location decisions??not considered by extant business model literature to date. While our discussion draws on the high technology new venture as our primary example, we believe our business model conceptualization has general applicability.