The use of logit and probit models in strategic management research: Critical issues

The logit and probit models have become critical parts of the management researcher's analytical arsenal, growing rapidly from almost no use in the 1980s to appearing in 15% of all articles published in Strategic Management Journal in 2005. However, a review of three top strategy journals revealed numerous areas in their use and interpretation where current practice fell short of ideal. Failure to understand how these models differ from ordinary least squares can lead researchers to misunderstand their statistical results and draw incorrect conclusions regarding the theory they are testing. Based on a review of the methodological literature and recent empirical papers in three leading strategy journals, this paper identifies four critical issues in their use: interpreting coefficients, modeling interactions between variables, comparing coefficients between groups (e.g., foreign and domestic firms), and measures of model fit. For each issue, the paper provides a background, a review of current practice, and recommendations for best practice. A concluding section presents overall implications for the conduct of research with logit and probit models, which should assist both authors and readers of strategic management research. Copyright © 2007 John Wiley & Sons, Ltd.

[1]  G. Hoetker Do Modular Products Lead to Modular Organizations , 2006 .

[2]  F. Rothaermel,et al.  The Effect of General and Partner-Specific Alliance Experience on Joint R&D Project Performance , 2005 .

[3]  Morten T. Hansen,et al.  When using knowledge can hurt performance: the value of organizational capabilities in a management consulting company , 2005 .

[4]  G. Hoetker Confounded Coefficients: Extending Recent Advances in the Accurate Comparison of Logit and Probit Coefficients Across Groups , 2004 .

[5]  Morten T. Hansen,et al.  How do multinational companies leverage technological competencies? Moving from single to interdependent explanations , 2004 .

[6]  C. Ai,et al.  Computing Interaction Effects and Standard Errors in Logit and Probit Models , 2004 .

[7]  Timothy B. Folta,et al.  Entry in the Presence of Dueling Options , 2004 .

[8]  Margarethe F. Wiersema,et al.  Modelling limited dependent variables: methods and guidelines for researchers in strategic management , 2003 .

[9]  Nicos Nicolaou,et al.  Social Networks in Organizational Emergence: The University Spinout Phenomenon , 2003, Manag. Sci..

[10]  David J. Ketchen,et al.  Data analytic trends and training in strategic management , 2003 .

[11]  Douglas J. Miller,et al.  An empirical examination of transaction- and firm-level influences on the vertical boundaries of the firm , 2003 .

[12]  K. Train Discrete Choice Methods with Simulation , 2003 .

[13]  S. Park,et al.  Firm Resources as Moderators of the Relationship Between Market Growth and Strategic Alliances in Semiconductor Start-UPS , 2002 .

[14]  Kent E. Neupert,et al.  National Culture, Transaction Costs, and the Choice Between Joint Venture and Wholly Owned Subsidiary , 2000 .

[15]  Todd G. Shields,et al.  Interpretation of Interaction Effects in Logit and Probit Analyses , 2000 .

[16]  P. Southwell,et al.  The Effect of All-mail Elections on Voter Turnout , 2000 .

[17]  Jeroen Weesie,et al.  Seemlingly unrelated estimation and the cluster-adjusted sandwich estimator , 2000 .

[18]  P. Allison,et al.  Comparing Logit and Probit Coefficients Across Groups , 1999 .

[19]  J. A. Calvin Regression Models for Categorical and Limited Dependent Variables , 1998 .

[20]  K. Train Recreation Demand Models with Taste Differences Over People , 1998 .

[21]  J. S. Long,et al.  Regression Models for Categorical and Limited Dependent Variables , 1997 .

[22]  K. Zimmermann,et al.  PSEUDO‐R2 MEASURES FOR SOME COMMON LIMITED DEPENDENT VARIABLE MODELS , 1996 .

[23]  Adrian C. Darnell,et al.  A Dictionary of Econometrics , 1994 .

[24]  Ian C. MacMillan,et al.  The emerging forum for business policy scholars , 1991 .

[25]  K. Train Qualitative Choice Analysis: Theory, Econometrics, and an Application to Automobile Demand , 1985 .

[26]  John H. Aldrich,et al.  Linear probability, logit and probit models , 1984 .

[27]  B. Efron Regression and ANOVA with Zero-One Data: Measures of Residual Variation , 1978 .

[28]  D. Rubinfeld,et al.  Econometric models and economic forecasts , 2002 .