Quantifying the robustness of empirical inferences in strategic management: The impact threshold of a confounding variable and robustness of inference to replacement

John R. Busenbark, Kenneth A. Frank, Spiro J. Maroulis, Ran Xu, Qinyun Lin

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

In this chapter, we explicate two related techniques that help quantify the sensitivity of a given causal inference to potential omitted variables and/or other sources of unexplained heterogeneity. In particular, we describe the Impact Threshold of a Confounding Variable (ITCV) and the Robustness of Inference to Replacement (RIR). The ITCV describes the minimum correlation necessary between an omitted variable and the focal parameters of a study to have created a spurious or invalid statistical inference. The RIR is a technique that quantifies the percentage of observations with nonzero effects in a sample that would need to be replaced with zero effects in order to overturn a given causal inference at any desired threshold. The RIR also measures the percentage of a given parameter estimate that would need to be biased in order to overturn an inference. Each of these procedures is critical to help establish causal inference, perhaps especially for research urgently studying the COVID-19 pandemic when scholars are not afforded the luxury of extended time periods to determine precise magnitudes of relationships between variables. Over the course of this chapter, we define each technique, illustrate how they are applied in the context of seminal strategic management research, offer guidelines for interpreting corresponding results, and delineate further considerations.

Original languageEnglish (US)
Title of host publicationResearch Methodology in Strategy and Management
PublisherEmerald Group Holdings Ltd.
Pages123-150
Number of pages28
DOIs
StatePublished - 2021

Publication series

NameResearch Methodology in Strategy and Management
Volume13
ISSN (Print)1479-8387

Keywords

  • Endogeneity
  • Impact threshold of a confounding variable (ITCV)
  • Omitted variable bias
  • Robustness of empirical inference
  • Robustness of inference to replacement (RIR)
  • Sensitivity analyses

ASJC Scopus subject areas

  • Strategy and Management

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