The use of logit and probit models in strategic management research: Critical issues
Article first published online: 5 FEB 2007
Copyright © 2007 John Wiley & Sons, Ltd.
Strategic Management Journal
Volume 28, Issue 4, pages 331–343, April 2007
How to Cite
Hoetker, G. (2007), The use of logit and probit models in strategic management research: Critical issues. Strat. Mgmt. J., 28: 331–343. doi: 10.1002/smj.582
- Issue published online: 27 FEB 2007
- Article first published online: 5 FEB 2007
- Manuscript Revised: 12 JUL 2006
- Manuscript Received: 30 SEP 2005
- statistical methods
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.