Lindner, Thomas, Puck, Jonas, Verbeke, Alain. 2020. Misconceptions about multicollinearity in international business research: Identification, consequences, and remedies. Journal of International Business Studies JIBS. 51 (3), 283-298.
BibTeX
Abstract
Collinearity between independent variables is a recurrent problem in quantitative empirical research in International Business (IB). We explore insufficient and inappropriate treatment of collinearity and use simulations to illustrate the potential impact on results. We also show how IB researchers doing quantitative work can avoid collinearity issues that lead to spurious and unstable results. Our six principal insights are the following: first, multicollinearity does not introduce bias. It is not an econometric problem in the sense that it would violate assumptions necessary for regression models to work. Second, variance inflation factors are indicators of standard errors that are too large, not too small. Third, coefficient instability is not a consequence of multicollinearity. Fourth, in the presence of a higher partial correlation between the variables, it can paradoxically become more problematic to omit one of these variables. Fifth, ignoring clusters in data can lead to spurious results. Sixth, accounting for country clusters does not pick up all country-level variation.
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Status of publication | Published |
---|---|
Affiliation | WU |
Type of publication | Journal article |
Journal | Journal of International Business Studies JIBS |
Citation Index | SSCI |
WU Journalrating 2009 | A |
WU-Journal-Rating new | FIN-A, MAN-A+, STRAT-A, VW-A, WH-A |
Language | English |
Title | Misconceptions about multicollinearity in international business research: Identification, consequences, and remedies |
Volume | 51 |
Number | 3 |
Year | 2020 |
Page from | 283 |
Page to | 298 |
Reviewed? | Y |
URL | https://rdcu.be/bM7gc |
DOI | http://dx.doi.org/10.1057/s41267-019-00257-1 |
Open Access | N |
Associations
- People
- Lindner, Thomas (Details)
- Puck, Jonas (Details)
- External
- Verbeke, Alain (University of Calgary, Canada)
- Organization
- Institute for International Business (Puck) (Details)
- Research areas (Ă–STAT Classification 'Statistik Austria')
- 5300 Economics (Details)
- 5307 Business and management economics (Details)
- 5337 World trade science (Details)
- 5344 Foreign trade (Details)
- 5358 Corporate finances (Details)