Are real options more valuable in the presence of agency conflicts?

The theory on real options has extended the traditional net present value rule in order to capture the value of flexibility in investment decisions. Typically, the theory of real options does not take into account agency conflicts (between central and divisional management). In this paper, we investigate the influence of agency conflicts on real options within a LEN-type model. We extend a standard LEN model with investment activities by explicitly considering the possibility to abandon an investment project after all parties involved have received further information about the project’s development. Especially, we analyze how the option’s flexibility value is influenced by the agency conflict. Our analysis shows that the real option alters the trade-off between risk sharing and incentives that underlies the agency conflict. Thereby, situations can occur in which central (and divisional) management evaluates the abandonment option ex ante differently than ex post. Using this framework, we discuss the role of commitment and the advantages of centralization and delegation of the abandonment decision.

Dependency of Crop Production between Global Breadbaskets: A Copula Approach for the Assessment of Global and Regional Risk Pools

As recent events have shown, simultaneous crop losses in different parts of the world can cause serious risks to global food security. However, to date, little is known about the spatial dependency of lower than expected crop yields from global breadbaskets. This especially applies in the case of extreme events, i.e., where one or more breadbaskets are experiencing far below average yields. Without such information, risk management approaches cannot be applied and vulnerability to extremes may remain high or even increase in the future around the world. We tackle both issues from an empirical perspective focusing on wheat yield. Interdependencies between historically observed wheat yield deviations in five breadbaskets (United States, Argentina, India, China, and Australia) are estimated via copula approaches that can incorporate increasing tail dependencies. In doing so, we are able to attach probabilities to interregional as well as global yield losses. To address the robustness of our results, we apply three different methods for constructing multivariate copulas: vine copulas, ordered coupling using a minimax approach, and hierarchical structuring. We found interdependencies between states within breadbaskets that led us to the conclusion that risk pooling for extremes is less favorable on the regional level. However, notwithstanding evidence of global climatic teleconnections that may influence crop production, we also demonstrate empirically that wheat production losses are independent between global breadbaskets, which strengthens the case for interregional risk pooling strategies. We argue that through interregional risk pooling, postdisaster liabilities of governments and international donors could be decreased.     

Facts,Opinions, and Scientific Memes: Reflections of and Recommendations for the March for Science in Germany

Germany ranked second in number of March for Science participants. The current essay is based on a focus group discussion with six participants of a march in a German university town and elucidates their motives for attending, their perceptions of how politically active scientists should be, the goals they think the march should aim to achieve, and their recommendations for future marches. Motives in Germany differed slightly from those mentioned in the United States. Discussants placed importance on the difference between facts and opinions, which is translated into recommendations for issue‐specific future marches.     

Institutional isomorphism and nonprofit managerialism: For better or worse?

Nonprofit organizations (NPOs) have increasingly adopted business‐like practices as a response to institutional pressures. Some researchers argue that this development leads to mission drift, whereas others find a positive effect on organizational performance. However, the institutional pressures responsible for shaping the nonprofit sector have remained hard to distinguish from each other. This study explores the consequences of mimetic, normative, and coercive pressures, and looks at how they affect managerialism, organizational performance, and mission drift. We link these concepts through a structural equation model based on survey data and find that one aspect of managerialism, strategic behavior, is a key construct in influencing the response to isomorphic pressures and can positively affect organizational performance while holding off‐mission drift. Normative isomorphism even has a direct positive effect on organizational performance. Mission drift can take place when organizations are under coercive pressure without having strategies or internal processes in place. These findings imply that organizations should invest in their strategy and the professional development of their staff to increase organizational performance and avoid mission drift.     

Längsschnittdaten und Mehrebenenanalyse

In the present article a few basic multilevel models for longitudinal data are introduced and applied to the Household Income and Labor Dynamics in Australia Survey 10 (HILDA) for demonstrational purposes. The covered models are adaptions of the random-intercept-only model, the random-intercept models and the random- intercept random-slope model with and without level-1 and level-2 predictors to longitudinal data. The modeling of contextual effects is covered. One particularity in longitudinal data is the fact that persons (level-2) may be regarded as the context of the time-varying observations on level-1. To incorporate the macro-level of sociology, it is necessary to expand the model to a third level. A model with three levels is introduced and in addition a simple growth curve model and a multivariate multilevel model are presented.     

Distribution-neutral provision of public goods

The paper describes a normative approach to budget incidence, given the provision of a public good. The objective is to balance the budget by an income tax such that the budget is distribution-neutral. This property requires that every consumer’s net welfare gain, i.e. the benefit from consuming the public good and the tax burden in financing it, does not change the inequality inherent in the income distribution. The properties of the distribution-neutral tax are investigated and completely determined. The marginal willingness to pay for the public good is decisive for the degree of progression of the tax schedule. My co-author Georg Tillmann passed away in March 2006, much too soon. He was my friend, more than a colleague. I dedicate this paper to his memory.     

Framing competitiveness: the advocacy of migration as an essential human resources strategy in Europe

ABSTRACT

This paper examines how competitiveness has been framed rhetorically and politically by interested actors in France, Germany, and the UK. Skilled rhetorical advocacy clothes particular political demands in the language of competitiveness and purported exigencies of the global economy, thus advancing political goals more easily that might otherwise encounter significant political opposition. In theoretical terms, the paper analyses the ideational framing of policy discourses. Empirically, the emphasis rests on exploring how governments, organised business, and business think tanks have attempted to advance demands for liberalised labour migration schemes in Europe by linking them rhetorically to the prerogative of economic competitiveness. Despite an adverse political climate, sceptical public opinion, and persistent unemployment, it has thus been politically possible to liberalise the regulation of labour migration considerably.