Quotation 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.


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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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Publication's profile

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-C, 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
International Business (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)
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