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


  • Wiersema, M.
  • Bowen, H.P.

    () (Vlerick Leuven Gent Management School)


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.

Suggested Citation

  • Wiersema, M. & Bowen, H.P., 2006. "The use of limited dependent variable techniques in strategy research: assessment and critique," Vlerick Leuven Gent Management School Working Paper Series 2006-33, Vlerick Leuven Gent Management School.
  • Handle: RePEc:vlg:vlgwps:2006-33

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    Cited by:

    1. 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.
    2. Zhi Yang & Xuemin Zhou & Pengcheng Zhang, 2015. "Discipline versus passion: Collectivism, centralization, and ambidextrous innovation," Asia Pacific Journal of Management, Springer, vol. 32(3), pages 745-769, September.
    3. 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).
    4. Chiara Franco & Alberto Marzucchi & Sandro Montresor, 2012. "Absorptive capacity, innovation cooperation and human-capital. Evidence from 3 European countries," JRC Working Papers on Corporate R&D and Innovation 2012-05, Joint Research Centre (Seville site).
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    6. Jean-Luc Arregle & Toyah L Miller & Michael A Hitt & Paul W Beamish, 2016. "How does regional institutional complexity affect MNE internationalization?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 47(6), pages 697-722, August.
    7. Junichi Yamanoi & Qing Cao, 2014. "Competition and termination of the alliances between asymmetric partners: The case of Japanese department stores," Asia Pacific Journal of Management, Springer, vol. 31(4), pages 949-971, December.
    8. 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.
    9. Lucio Fuentelsaz & Consuelo González-Gil & Juan P. Maicas, 2015. "What determines entepreneurial failure: taking advantage of the institutional context," Documentos de Trabajo dt2015-05, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
    10. Nikolas Rathert, 2016. "Strategies of legitimation: MNEs and the adoption of CSR in response to host-country institutions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 47(7), pages 858-879, September.
    11. Jisun Yu & Seung-Hyun Lee & Kunsoo Han, 2015. "FDI motives, market governance, and ownership choice of MNEs: A study of Malaysia and Thailand from an incomplete contracting perspective," Asia Pacific Journal of Management, Springer, vol. 32(2), pages 335-362, June.

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    empirical methods; limited dependent variable; strategy research;

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