Applying Random Coefficient Models to Strategy Research: Testing for Firm Heterogeneity, Predicting Firm-Specific Coefficients, and Estimating Strategy Trade-Offs

49 Pages Posted: 10 Sep 2013

See all articles by Juan Alcacer

Juan Alcacer

Harvard University - Strategy Unit

Wilbur Chung

University of Maryland - Robert H. Smith School of Business

Ashton Hawk

Leeds School of Business, University of Colorado Boulder

Gonçalo Pacheco-de-Almeida

HEC Paris - Strategy & Business Policy

Date Written: August 30, 2013

Abstract

Although Strategy research aims to understand how firm actions have differential effects on performance, most empirical research estimates the average effects of these actions across firms. This paper promotes Random Coefficients Models (RCMs) as an ideal empirical methodology to study firm heterogeneity in Strategy research. Specifically, we highlight and illustrate three main benefits that RCMs offer to Strategy researchers — testing firm heterogeneity, predicting firm-specific effects, and estimating trade-offs in strategy — using both synthetic and actual data-sets. These examples showcase the potential uses of RCMs to test and build theory in Strategy, as well as to perform exploratory and definitive analyses of firm heterogeneity.

Suggested Citation

Alcacer, Juan and Chung, Wilbur C. and Hawk, Ashton and Pacheco-de-Almeida, Gonçalo, Applying Random Coefficient Models to Strategy Research: Testing for Firm Heterogeneity, Predicting Firm-Specific Coefficients, and Estimating Strategy Trade-Offs (August 30, 2013). Harvard Business School Strategy Unit Working Paper No. 14-022; Robert H. Smith School Research Paper. Available at SSRN: https://ssrn.com/abstract=2323578 or http://dx.doi.org/10.2139/ssrn.2323578

Juan Alcacer (Contact Author)

Harvard University - Strategy Unit ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States
617 495-6338 (Phone)
617 495-0355 (Fax)

Wilbur C. Chung

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

HOME PAGE: http://www.rhsmith.umd.edu/faculty/wchung/

Ashton Hawk

Leeds School of Business, University of Colorado Boulder ( email )

United States

Gonçalo Pacheco-de-Almeida

HEC Paris - Strategy & Business Policy ( email )

Jouy-en-Josas Cedex, 78351
France
(+33) (0)1 39 67 97 62 (Phone)

HOME PAGE: http://www.hec.edu/Faculty-Research/Faculty-Directory/PACHECO-DE-ALMEIDA-Goncalo

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