In this paper we use simulations to examine how endogeneity biases the results reported by ordinary least squares (OLS) regression. In addition, we examine how instrumental variable techniques help ...to alleviate such bias. Our results demonstrate severe bias even at low levels of endogeneity. Our results also illustrate how instrumental variables produce unbiased coefficient estimates, but instrumental variables are associated with extremely low levels of statistical power. Finally, our simulations highlight how stronger instruments improve statistical power and that endogenous instruments can report results that are inferior to those reported by OLS regression. Based on our results, we provide a series of recommendations for scholars dealing with endogeneity.
Research summary: We investigate the theoretical and empirical implications of longitudinal data in strategy research. Theoretically, longitudinal data allow strategy researchers to distinguish ...between relationships among constructs within versus between firms. Empirically, longitudinal data contain information about two types of relationships: within- and between-firm. We describe how the hybrid approach, a technique used in other disciplines, disentangles within- and between-firm relationships. We reexamine a study of research and development expenditures to illustrate the advantages of the hybrid approach. Based on our theory and reexamination, we offer a series of recommendations for researchers using longitudinal data to test theoretical perspectives. Managerial summary: Strategy research examines two sources of variation over time: what is occurring within the firm (e.g., Do firms perform better over time when investing more in R&D?) and what is occurring between firms (e.g., Do firms investing more in R&D outperform firms investing less in R&D?). These two sources may be similar or different in both direction and magnitude, and when significant differences exist in either direction or magnitude, researchers must carefully consider the implication of these differences to their theoretical rationale and statistical testing. Our article highlights the benefits of theorizing and testing these two sources of variance, providing scholars the ability to broaden both the theoretical and empirical contribution of their research. This distinction is important to how research informs managerial decision making.
Research summary: The use of Heckman models by strategy scholars to resolve sample selection bias has increased by more than 700 percent over the last decade, yet significant inconsistencies exist in ...how they have applied and interpreted these models. In view of these differences, we explore the drivers of sample selection bias and review how Heckman models alleviate it. We demonstrate three important findings for scholars seeking to use Heckman models: First, the independent variable of interest must be a significant predictor in the first stage of a model for sample selection bias to exist. Second, the significance of lambda alone does not indicate sample selection bias. Finally, Heckman models account for sample-induced endogeneity, but are not effective when other sources of endogeneity are present. Managerial summary: When nonrandom samples are used to test statistical relationships, sample selection bias can lead researchers to flawed conclusions that can, in turn, negatively impact managerial decision-making. We examine the use of Heckman models, which were designed to resolve sample selection bias, in strategic management research and highlight conditions when sample selection bias is present as well as when it is not. We also distinguish sample selection bias, a form of omitted variable (OV) bias, from more traditional OV bias, emphasizing that it is possible for models to have sample selection bias, traditional OV bias, or both. Accurately identifying the type(s) of OV bias present is essential to effectively correcting it. We close with several recommendations to improve practice surrounding the use of Heckman models.
Signaling Theory: A Review and Assessment Connelly, Brian L.; Certo, S. Trevis; Ireland, R. Duane ...
Journal of Management,
01/2011, Letnik:
37, Številka:
1
Book Review, Journal Article
Recenzirano
Signaling theory is useful for describing behavior when two parties (individuals or organizations) have access to different information. Typically, one party, the sender, must choose whether and how ...to communicate (or signal) that information, and the other party, the receiver, must choose how to interpret the signal. Accordingly, signaling theory holds a prominent position in a variety of management literatures, including strategic management, entrepreneurship, and human resource management. While the use of signaling theory has gained momentum in recent years, its central tenets have become blurred as it has been applied to organizational concerns. The authors, therefore, provide a concise synthesis of the theory and its key concepts, review its use in the management literature, and put forward directions for future research that will encourage scholars to use signaling theory in new ways and to develop more complex formulations and nuanced variations of the theory.
Research summary: Managers can disclose information to security analysts as a form of impression management, but doing so is problematic because competitors can use that same information at the ...expense of the firm. We identify an impression management technique we call foreshadowing, which refers to hinting about future potential strategic activity. Foreshadowing provides information of value to analysts that can influence their evaluations of a firm, but not so much information as to put the firm at a competitive disadvantage. We hypothesize and find that managers who foreshadow acquisition announcements receive fewer analyst downgrades following the announcements, especially when there is more analyst uncertainty about the firm. We also hypothesize and find that analysts' responses to foreshadowing positively influence the likelihood that managers eventually acquire other firms. Managerial summary: Security analysts are often suspicious when firms announce acquisitions as those announcements are cumbersome to analyze on short notice and raise questions about managerial motivations that might not represent the best interests of the firm. We find that managers can improve analyst reactions to acquisition announcements by disclosing some information of value to analysts—specifically by hinting that an acquisition could occur in the future. We refer to such hints as foreshadowing. Foreshadowing entails giving analysts information to reduce their suspicions and facilitate their analyses, but not so much information as to degrade the firm's competitive information advantage over other firms. Foreshadowing also allows managers the option to reconsider actually executing the acquisition if analysts respond negatively to its possibility.
Ownership as a Form of Corporate Governance Connelly, Brian L.; Hoskisson, Robert E.; Tihanyi, Laszlo ...
Journal of management studies,
December 2010, Letnik:
47, Številka:
8
Journal Article
Recenzirano
Firm ownership is an increasingly influential form of corporate governance. Although firms might be owned by different types of owners, most studies examine owner influence on a particular firm ...outcome in isolation. This study synthesizes research from multiple disciplines on different types of owners and offers a unifying framework of governance through ownership. Using this framework, we describe the motivations of various types of owners, the tactics owners use to affect firms in which they are invested, and the dominant firm outcomes these owners seek to influence. We note how heightened managerial awareness of heterogeneous owner interests increases owner influence on firm‐level outcomes. We also provide a roadmap for future study and offer research questions about where scholars might turn their attention to better understand the role of owners in directing firm actions. Our study draws attention to emerging forms of ownership, such as hedge funds and sovereign wealth funds, and highlights the changing (and often competing) interests of shareholders and how this impacts theories of governance.
A number of studies in strategic management rely on panel (longitudinal) data to test theory. The advantages of panel data notwithstanding, such data introduce analytic problems (e.g., ...autocorrelation, heteroskedasticity, contemporaneous correlation) that make traditional estimators (e.g., ordinary least squares) inappropriate. This study highlights the influence of contemporaneous correlation, a statistical problem that affects the analysis of panel data. Using Monte Carlo simulations, the authors find that contemporaneous correlation is particularly problematic when analyzing data sets typically used in strategic management research. They suggest straightforward techniques to mitigate the harmful effects of contemporaneous correlation.
Economists have long held that bringing firms under the umbrella of a common ownership structure creates monopolistic conditions that reduce competition. We challenge this view by investigating ...competition between firms in a nuanced manner. We examine the competitive and performance implications of "common institutional ownership," which occurs when an institutional investor owns a sizeable number of shares in two publicly traded firms. We argue that rival firms with common ownership structures will engage in dissimilar competitive action repertoires to avoid direct competition with each other. Competing aggressively, but with dissimilar action repertoires, allows rivals to maintain high levels of performance. Competing with dissimilar action repertoires also helps ensure that performance disparity between the two firms remains low. In other words, competitive aggressiveness with dissimilar action repertoires yields an optimal competitive solution for rival firms and their common owners.
This research extends agency theory by exploring the influence of varied, competing, principal interests on executive actions. Findings reveal that ownership of a firm by dedicated institutional ...investors, who hold concentrated portfolios over time, is positively associated with firm use of strategic competitive actions. Ownership by transient institutional investors, who hold broad portfolios and make frequent trades based on current earnings, is negatively associated with strategic competitive actions and positively associated with tactical ones. Appreciable ownership of the same firm by these two classes of investors influences both strategic and tactical competitive actions. These results have broad implications for executives, investors, and policy makers.
Bayesian analysis offers strategy scholars numerous benefits. In addition to aligning empirical and theoretical endeavors by incorporating prior knowledge, the Bayesian approach allows researchers to ...estimate and visualize relationships that reflect the probability distributions many strategy researchers mistakenly interpret from conventional techniques. Yet, strategy scholars have proven hesitant to adopt Bayesian methods. We suggest that this is because there is no accessible template for employing the technique with the types of data strategy researchers tend to encounter. The central objective of our research is to synthesize disparate contributions from the Bayesian literature that are relevant for strategy scholarship, especially for nested data. We provide an intuitive overview of Bayesian thinking and illustrate how scholars can employ Bayesian techniques to analyze nested data using an example dataset involving CEO compensation. Our results show how using Bayesian models may lead to substantively different interpretations and conclusions compared to traditional approaches based on frequentist techniques.
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