Abstract
Despite scholars’ admonitions regarding the use of ratios in statistical analyses, the practice is common in management research. This is particularly true in the area of strategic management, where important variables of interest are operationalized as ratios. In this study, we employ simulations to demonstrate the implications of using ratios in statistical analyses. Our simulations illustrate that ratio variables produce inaccurate parameter estimates and can result in lower levels of statistical power (i.e., the ability to uncover hypothesized relationships). We also find that when an independent or a dependent variable is a ratio, the relationship between the independent and dependent variable fluctuates as the dispersion of the denominator changes. These fluctuations occur even when the correlations between the unscaled variables remain exactly the same. We also find that including ratios in models as control variables influences estimates of relationships between focal independent and dependent variables. This is true even when neither the independent or dependent variable is a ratio. We provide several recommendations for researchers who may be interested in avoiding the pitfalls of ratio variables.
Original language  English 

Pages (fromto)  211237 
Journal  Organizational Research Methods 
Volume  23 
Issue number  2 
Early online date  2018 
Publication status  Published  Apr 2020 
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Dive into the research topics of 'Divided we fall: How ratios undermine research in strategic management'. Together they form a unique fingerprint.Prizes

2020 Organizational Research Methods Best Paper Award
Certo, S. Trevis (Recipient), Busenbark, John R. (Recipient), Kalm, Matias (Recipient) & LePine, Jeffery A. (Recipient), 2021
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