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The use of limited dependent variable techniques in strategy research: assessment and critique

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  • Wiersema, M.
  • Bowen, H.P.

    ()
    (Vlerick Leuven Gent Management School)

Abstract

Strategy researchers are increasingly turning their attention from examining the implications of strategic choices on firm performance to examining the factors that determine strategic choice at the firm level. This shift of research orientation has meant that researchers are increasingly faced with a limited dependent variable (LDV) that takes a limited number of usually discrete values. In such cases researchers typically use discrete LDV methods such as Logit or Probit and, in fact, the use of such methods has increased significantly in recent years. Despite their growing popularity, there appear to be widespread problems in the application, reporting, and interpretation of LDV methods and their results within the literature. We examined the use of LDV methods in 50 papers published since 2002 in two top-tier journals that are primary outlets for empirical strategy research (Strategic Management Journal and Academy of Management Journal). One particularly troublesome issue is the finding that researchers fail to correctly analyze moderating hypotheses, a situation that likely stems from a lack of familiarity with the nonlinear nature of LDV models. Based on our review of the literature, this paper provides an assessment of the use of the most common LDV methods, highlights problems and inconsistencies regarding their use and interpretation, and provides guidelines and suggestions for researchers seeking to use LDV statistical techniques.

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Bibliographic Info

Paper provided by Vlerick Leuven Gent Management School in its series Vlerick Leuven Gent Management School Working Paper Series with number 2006-33.

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Length: 22 pages
Date of creation: 04 Oct 2006
Date of revision:
Handle: RePEc:vlg:vlgwps:2006-33

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Related research

Keywords: empirical methods; limited dependent variable; strategy research;

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Cited by:
  1. Chiara Franco & Alberto Marzucchi & Sandro Montresor, 2012. "Absorptive capacity, innovation cooperation and human-capital. Evidence from 3 European countries," JRC-IPTS Working Papers on Corporate R&D and Innovation 2012-05, Institute of Prospective Technological Studies, Joint Research Centre.
  2. Hagedoorn, John & Wang, Ning, 2010. "Is there complementarity or substitutability between internal and external R&D strategies?," MERIT Working Papers 005, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  3. Harry P. Bowen, 2009. "Testing for Moderating Effects in Limited Dependent Variable Models : Structural versus Secondary Interactions," Discussion Paper Series 2009-01, McColl School of Business, Queens University of Charlotte, revised Oct 2009.
  4. Aschhoff, Birgit & Grimpe, Christoph, 2012. "Peer effects and academics' industry involvement: The moderating role of age on professional imprinting," ZEW Discussion Papers 12-011, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Stefan Hilger & Ansgar Richter & Utz Schaeffer, 2013. "Hanging Together, Together Hung? Career Implications of Interpersonal Ties Between CEOs and Top Managers," BuR - Business Research, German Academic Association for Business Research, vol. 6(1), pages 8-32, May.

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