Endogeneity bias

28th January 2017 |   Professor Nick Lee

Endogeneity Bias

For the past few columns, I introduced critical issues in designing your own research, with a special focus on how to design experiments. For the next few columns, I’m going to build on those pieces to some extent, to explore a set of issues that I see as perhaps even more important – and especially so in today’s world.

Specifically, I’m going to introduce a set of key issues you need to be aware of when you draw conclusions from research that’s already been done, that you might read about in newspapers, white papers, management books, magazines, and the like (and, yes, even academic papers). Many of these issues are vitally important to what we can say and believe about the results of research, but few people are ever aware of them. Indeed, in some cases, lack of consideration of them can render the results of research completely meaningless.

The first issue I am going to introduce is called endogeneity bias. If you have training in economics, and especially with a focus on econometrics, this is something you probably already know about. But, in my view, it’s a bit of a scandal that outside that environment very few people are ever taught about it. That’s a real problem, because as you will see soon, endogeneity bias can render research on really important topics (eg social policy, as well as business-related issues) essentially useless. I’m going to explain this concept without the use of complex equations, but I will use a diagram and a few symbols to make my points clearer.

Professor of Marketing at Warwick Business School | + posts

Nick Lee is Professor of Marketing at Warwick Business School and the Honorary Chair of Marketing and Organizational Research at Aston Business School. His research interests include sales management, social psychology, research methodology, and ethics. He is Editor in Chief of the European Journal of Marketing, the Section Editor for Sales Research Methods for the Journal of Personal Selling and Sales Management, and he serves on the review panel or editorial board of several other journals. Nick is an Honorary Fellow of the APS where he directs research activities. Contact: Nick.Lee@wbs.ac.uk.