Activity I Last Year Your Firm Collected Data On Each Of Its

Activity I Last Year Your Firm Collected Data On Each Of Its 107 Div

Activity I - Last year, your firm collected data on each of its 107 division managers. The data contain growth figures for each manager's division, the manager's tenure with the firm, and the manager's score on a leadership test, which was administered firmwide. These data are contained in the file attached. Run a regression designed to determine the effect of manager tenure on division growth. What role, if any, can the manager's leadership test score play in the regression you ran for Part a? Explain.

Paper For Above instruction

In analyzing the impact of managerial tenure on division growth, it is essential to consider potential confounding variables that might influence the observed relationship. The data collected by the firm on division growth figures, managerial tenure, and leadership test scores provide a robust basis for empirical analysis. The primary objective is to quantify how managerial tenure affects division growth, using a regression model. Subsequently, examining the role of the leadership test score offers insights into additional factors that might influence managerial effectiveness and division performance.

To begin, we specify a simple linear regression model where the dependent variable is the division growth figure, and the independent variable is managerial tenure. The model can be expressed as:

Growth_i = β₀ + β₁ * Tenure_i + ε_i

where Growth_i represents the growth figure for division i, Tenure_i is the number of years the manager has been with the firm, and ε_i is the error term capturing unobserved factors. Running this regression, the coefficient β₁ indicates the expected change in division growth associated with an additional year of managerial tenure.

In terms of the role of the leadership test score, including it as an additional explanatory variable can augment the regression:

Growth_i = β₀ + β₁ Tenure_i + β₂ TestScore_i + η_i

Incorporating the leadership test score allows us to assess whether management ability, as proxied by the test score, has an independent effect on division growth beyond tenure. It also helps mitigate omitted variable bias; if leadership quality influences division growth and correlates with tenure, excluding test scores could bias the estimated effect of tenure. Conversely, if test scores do not significantly improve model fit, their inclusion might primarily serve as a control variable to parse out the influence of management quality from tenure.

In conclusion, the regression of division growth on managerial tenure is the primary analysis to understand the impact of experience on performance. The inclusion of leadership test scores adds depth to this analysis, potentially revealing if management ability, as measured by the test, independently influences division growth or if its effect mediates or confounds the tenure relationship.

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