Economic Evaluation of Scale Dependent Technology Investments

We study the effect of financial risk on the economic evaluation of a project with capacity decisions. Capacity decisions have an important effect on the project̂s value through the up‐front investment, the associated operating cost, and constraints on output. However, increased scale also affects the financial risk of the project through its effect on the operating leverage of the investment. Although it has long been recognized in the finance literature that operating leverage affects project risk, this result has not been incorporated in the operations management literature when evaluating projects. We study the decision problem of a firm that must choose project scale. Future cash flow uncertainty is introduced by uncertain future market prices. The firm's capacity decision affects the firm's potential sales, its expected price for output, and its costs. We study the firm's profit maximizing scale decision using the CAPM model for risk adjustment. Our results include that project risk, as measured by the required rate of return, is related to the inverse of the expected profit per unit sold. We also show that project risk is related to the scale choice. In contrast, in traditional discounted cash flow analysis (DCF), a fixed prescribed rate is used to evaluate the project and choose its scale. When a fixed rate is used with DCF, a manager will ignore the effect of scale on risk and choose suboptimal capacity that reduces project value. S/he will also misestimate project value. Use of DCF for choosing scale is studied for two special cases. It is shown that if the manager is directed to use a prescribed discount rate that induces the optimal scale decision, then the manager will greatly undervalue the project. In contrast, if the discount rate is set to the risk of the optimally‐scaled project, the manager will undersize the project by a small amount, and slightly undervalue the project with the economic impact of the error being small. These results underline the importance of understanding the source of financial risk in projects where risk is endogenous to the project design.     

Tolerable or Acceptable: A Comparison of Risk Regulation in the United Kingdom and in the Netherlands

In managing major accident hazards in industry risk, both the United Kingdom and the Netherlands use quantitative risk analysis and quantified risk criteria. These should be understood in the historical, legal, and political context in which they were drawn up. Even when criteria are numerically the same they do not necessarily mean the same thing. The legal and historical context differs widely between the two countries. Nevertheless, it is surprising that the final results in terms of land use and levels of risk are very similar.     

Quantitative Estimates of Risk for Noncancer Endpoints

While quantitative estimates of risk have been a standard practice in cancer risk assessment for many years, no similar practice is evident in noncancer risk assessment. We use two recent examples involving methylmercury and arsenic to illustrate the negative impact of this discrepancy on risk communication and cost-benefit analysis. We argue for a more balanced treatment of cancer and noncancer risks and suggest an approach for reaching this goal.     

Conceptualizing reflection in experience-based workplace learning

This paper seeks to understand key dimensions of reflection in experience-based workplace learning for research being collaboratively undertaken by scholars in Dutch and US research institutions. We systematically explore and compare Tara Fenwick’s analysis of five perspectives on cognition to distinguish among constructivist, psychoanalytic, situative, critical-cultural, and enactivist perspectives on reflection. Our aim is to examine how to conceptualize reflection so that one or more perspectives can complement our understanding of learning through experience at work. We position reflection not only from a practical but also from a theoretical perspective that moves beyond the individual focus of the constructivist perspective. Fenwick’s five perspectives are described in terms of whether and how reflection is utilized, key activities in the process of reflection, relative focus on the individual and/or the context, triggers for reflection, role of power and positionality, role of emotions, and reflection outcomes. We conclude that adding other lenses to the dominant constructivist perspective helps expand our understanding of reflection as well as identify and attend to other tools, people, and factors in the work situation that influence reflection processes and learning outcomes. The paper closes with a discussion of promising new approaches that have emerged since Fenwick’s analysis.     

The Role of Local Context in the Cross‐border Acquisitions by Emerging Economy Multinational Enterprises

This paper explores the role of local context in cross‐border acquisitions by emerging economy multinational enterprises (EMNEs). It argues that the importance of local context has remained despite the increased global integration of the world economy. Hypotheses are tested using data on Indian acquisitions hosted in 70 countries over an eight‐year period. Results, which are consistent across number and value of cross‐border acquisitions, show that the local context in host countries offers contrasting benefits. Emerging economy multinational enterprises exploited these benefits by embedding in host countries through acquisitions. The acquisition strategy is conventional in the motives underpinning internationalization, but novel in its geographical clustering of host countries, and idiosyncratic owing to the EMNE's ability to draw on home country embeddedness. The paper develops theoretical implications and extends the concept of embeddedness, treating it as a series of internalization or quasi‐internalization decisions across a variety of local contexts by multinationals.