IDEAS home Printed from https://ideas.repec.org/p/dur/durham/2006_03.html
   My bibliography  Save this paper

Beyond Gaussian Averages: Redirecting Management Research Toward Extreme Events and Power Laws

Author

Listed:
  • Pierpaolo Andriani

    () (Durham Business School)

  • Bill McKelvey

    () (Anderson School of Management, UCLA)

Abstract

Practicing managers live in a world of ‘extremes’ but management research is based on Gaussian statistics that rule out those extremes. On occasion, deviation amplifying mutual causal processes among interdependent data points cause extreme events characterized by power laws. They seem ubiquitous; we list 80 kinds of them – half each among natural and social phenomena. We draw a ‘line in the sand’ between Gaussian (based on independent data points, finite variance and emphasizing averages) and Paretian statistics (based on interdependence, positive feedback, infinite variance, and emphasizing extremes). Quantitative journal publication depends almost entirely on Gaussian statistics. We draw on complexity and earthquake sciences to propose redirecting Management Studies. No statistical findings should be accepted into Management Studies if they gain significance via some assumption-device by which extreme events and infinite variance are ignored. The cost is inaccurate science and irrelevance to practitioners.

Suggested Citation

  • Pierpaolo Andriani & Bill McKelvey, 2006. "Beyond Gaussian Averages: Redirecting Management Research Toward Extreme Events and Power Laws," Working Papers 2006_03, Durham University Business School.
  • Handle: RePEc:dur:durham:2006_03
    as

    Download full text from publisher

    File URL: http://dro.dur.ac.uk/10371
    File Function: main text
    Download Restriction: no

    References listed on IDEAS

    as
    1. Levy, Moshe & Solomon, Sorin, 1997. "New evidence for the power-law distribution of wealth," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 242(1), pages 90-94.
    2. repec:cai:popine:popu_p1977_32n1_0130 is not listed on IDEAS
    3. Axelrod, Robert & Bennett, D. Scott, 1993. "A Landscape Theory of Aggregation," British Journal of Political Science, Cambridge University Press, vol. 23(02), pages 211-233, April.
    4. repec:cai:popine:popu_p1977_32n1_0034 is not listed on IDEAS
    5. Abraham Ravid, S., 2004. "Hollywood Economics: How extreme uncertainty shapes the film industry, Arthur De Vany; Routledge, London and New York, 2004, pages xvi + 308, ISBN 0-415-31260-4 (hbk), $135.00, 0-415-31261-2 (pbk), $3," Journal of Economic Psychology, Elsevier, vol. 25(6), pages 895-898, December.
    6. Carley, Kathleen M., 1996. "A comparison of artificial and human organizations," Journal of Economic Behavior & Organization, Elsevier, vol. 31(2), pages 175-191, November.
    7. repec:cai:popine:popu_p1977_32n1_0298 is not listed on IDEAS
    8. repec:cup:apsrev:v:97:y:2003:i:01:p:135-150_00 is not listed on IDEAS
    9. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    10. Forni, Mario & Lippi, Marco, 1997. "Aggregation and the Microfoundations of Dynamic Macroeconomics," OUP Catalogue, Oxford University Press, number 9780198288008.
    11. S. Battiston & M. Catanzaro, 2004. "Statistical properties of corporate board and director networks," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 38(2), pages 345-352, March.
    12. Poole, Marshall Scott & Van de Ven, Andrew H. & Dooley, Kevin & Holmes, Michael E., 2000. "Organizational Change and Innovation Processes: Theory and Methods for Research," OUP Catalogue, Oxford University Press, number 9780195131987.
    13. Nonaka, Ikujiro & Nishiguchi, Toshihiro, 2001. "Knowledge Emergence: Social, Technical and Evolutionary Dimensions of Knowledge Creation," OUP Catalogue, Oxford University Press, number 9780195130638.
    14. Zanette, Damián H & Manrubia, Susanna C, 2001. "Vertical transmission of culture and the distribution of family names," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 295(1), pages 1-8.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yang, Jianmei & Wang, Wenjie & Chen, Guanrong, 2009. "A two-level complex network model and its application," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(12), pages 2435-2449.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dur:durham:2006_03. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (IT Office). General contact details of provider: http://edirc.repec.org/data/deduruk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.