Boulding, William
January 1990
Marketing Science;Winter90, Vol. 9 Issue 1, p88
Academic Journal
This article presents comments of the author in response to a research on business performance and its unobservable effects conducted by Robert Jacobson. This research paper assesses the importance of unobservable effects in marketing models. The existence of time-invariant unobservable effects are important, secondly a general statistical framework is provided. The enduring factor payments may accrue to a business with private resources . It shows for the general problem of unobservable's, failure to control for unobserved fixed factors that correlate with performance, and factors thought to influence performance, results in biased parameter estimates. Thus, modelers in economics frequently propose fixed effect estimation to control for factors such as unobserved managerial efficiency believing that managerial efficiency affects both performance and factors influencing performance. This paper suggests that fixed effects do matter and exercise of extreme caution in interpreting results based on models that fail to control for unobservable effects is required.


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