Readings

Wooldridge, J. M. (2013). Introductory econometrics: a modern approach (5th ed.). Mason, OH: South Western, Cengage Learning. (Chapters 1-4)

Hekman, D. R., Aquino, K., Owens, B. P., Mitchell, T. R., Schilpzand, P., & Leavitt, K. (2010). An Examination of Whether and How Racial and Gender Biases Influence Customer Satisfaction. Academy of Management Journal, 53(2), 238-264. doi:10.5465/AMJ.2010.49388763 (AMJ best paper winner for 2010)

Deephouse, D. L. (1999). To be different, or to be the same? It's a question (and theory) of strategic balance. Strategic Management Journal, 20(2), 147-166. doi:10.1002/(SICI)1097-0266(199902)20:2<147::AID-SMJ11>3.0.CO;2-Q

Instructions

Read the listed material. You should understand the main principles discussed by Wooldridge, but you do not necessarily need to fully understand all the details or the equations. If you must choose, reading all four chapters quickly is preferable to reading just a part of the material in depth. 

Questions

Please answer the questions in English.

1) Search definitions or explanations for following concepts from Wooldridge's book. Quote the definition if possible and if not, at minimum indicate the page numbers where Wooldridge explains the concept. Then explain how the concepts are used in the empirical papers by Hekman and colleagues and Deephouse. (Hint: Most, but not all concepts are used in the empirical papers. Some concepts that are used are not obvious and it is OK to say that you did not find the concept used in the papers.)

  1. Outlier
  2. Logarithm transformation
  3. Heteroskedasticity
  4. One- and two-tailed tests
  5. Multicollinearity
  6. R-squared
  7. Error term or disturbance
  8. Partial effect
  9. Confidence interval
  10. F test

2) Is the direct effect of strategic deviation on relative ROA large or small in the study by Deephouse? Justify your opinion by citing specific numbers (e.g. regression coefficients) in the study. You can ignore Model 3 and the nonlinear effect (square of strategic deviation). If you think that the study does not provide sufficient information to make an informed judgment, explain what additional information you would prefer to have.

3) Hekman et al article contains the following two sentences: "First, the relationships between the dependent variable and both panel age and physician age have opposite signs in the correlation table versus the regression table. This pattern suggests that these variables may have somehow influenced our results by suppressing variance in the dependent variable that was irrelevant to its prediction (Tabachnick & Fidell, 2003)." (p. 248) Answer the following question:

  • Explain in non-statistical terms what Hekman et al are trying to say?
  • Each sentence in an article should have a purpose. What is the purpose of these two sentences?

The course Zotero library contains the full version history of the article as it went though the AMJ review process, including reviewer comments and authors response letters. Read or skim through these documents and answer the following question:

  • What do the editor and reviewers say about suppression and how do they justify their opinions?

Finally, based on your reading answer the following question:

  • What do you think is the reason that the sign of the correlation and regression coefficients differ and is it a problem?

You can find the definition for "suppression" on page 26 of 

Kline, R. B. (2011). Principles and practice of structural equation modeling (3rd ed.). New York, NY: Guilford Press.

Submit your answers two days before the lecture and bring them also to the lecture. The answer should be 3-6 pages. If you have done this assignment before as a part of another course or a previous attempt at this course, you can use your old answer as a starting point and do a revision. If you need help or have questions about the assignment, please post those to the course forum.

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