Dr.

Theo Schöller-Stiftungslehrstuhl für Technologie- und Innovationsmanagement

Technische Universität München

Exam A
Empirical Research in Economics and Management
WT 2014

General information:

 Please check the number of pages. The exam has 27 pages (including the cover sheet).
Leave all pages stapled together.
 The editing time is 120 minutes. You can achieve a total of 120 points. For each point, you should
approximately use 1 minute of editing time.
 Answer the questions exclusively on the distributed pages. If needed please use the rear page.
 Always answer short and precise. Important: Show your comprehension.
 You may use a non-electronic dictionary and a non-programmable calculator.
 Auxiliary resources such as scripts, books or personal notes are not allowed.
 You may answer in German as well. You are not allowed to mix German and English in sub-questions.
That also applies for technical terms. However, you could e.g. answer Question 1.a) in German and
1.b) in English.

 Please enter your name and your matriculation number:

Name: _____________________________________________

Matriculation number: _____________________________________________

Good luck! 

Question Points obtainable Points obtained

1 30
2 18
3 7
4 18
5 11
6 11
7 16
8 9
Total 120
Multiple Choice Questions:

Which answer is correct?

Note:

 For each question, exactly one of the four statements contains the right answer.
 Only mark the correct answer with an
 Please note that you obtain 0 points if an incorrect box is checked or if none, two or more boxes are
checked.

2
Question 1: Multiple choice (30 points)

Answer
1a Which of the following statements is correct?
(2 points)

a In a right-skewed distribution the arithmetic mean is typically below the median

b In a right-skewed distribution the arithmetic mean is typically higher than the median

c In a right-skewed distribution the arithmetic mean typically coincides with the median

d None of the above statements is correct

Answer
1b Which of the following statements regarding reliability is correct?
(2 points)

a An empirical analysis is reliable if the same results, apart from sampling errors, are
obtained for other samples from the same population

b An empirical analysis is reliable if the same results, apart from sampling errors, are
obtained for other populations

c The higher the reliability of an empirical analysis conducted for one industry, the better
it can be generalized to other industries.

d None of the above.

Which of the following statements on the Covariance formula Answer

1c 𝟏
𝑪𝒐𝒗(𝒙, 𝒚) = ∑𝒏 (𝒙 ̅)(𝒚𝒊 − 𝒚
−𝒙 ̅) is correct? (2 points)
𝒏−𝟏 𝒊=𝟏 𝒊

a Covariance is always >0

b It is normalized to allow for comparison of results

c 𝑥̅ and 𝑦̅ denote sample means

d 𝑥̅ and 𝑦̅ denote population means

3
 You want to survey start-up firms in Munich to understand how they negotiate
with Venture Capital firms. There are 1000 start-ups in Munich, 30 of them are Answer
1d
Venture Capital funded. For the survey you want to draw a sample of 50 firms. (1 point)
Which sampling method should you choose?

a Random sampling

b Stratified sampling

c Cluster sampling

d Multi-stage sampling

Answer
1e Which of the following statements regarding validity is not correct?
(2 points)

a Internal validity of an empirical study refers to the extent to which a causal conclusion
based on a study is warranted

b External validity refers to the possibility of generalizing the results of an empirical study
to other units of observation and/or other situations

c Internal validity of an empirical study is increased if a repetition of the study with a

different sample yields, within the margins of sampling errors, the same result

d External validity of a cross-sectional empirical study refers to its generalizability both

for other samples and for other points in time

Answer
1f What is the meaning of the p-value?
(1 point)

a The probability that the null hypothesis is correct

b The probability that the null hypothesis is by mistake accepted

c The probability of obtaining the observed value, or even larger ones, if H0 was correct

d The probability that the level of significance (critical value) is exceeded by the test

4
 Answer
1g The Bravais-Pearson correlation can be used to measure correlation between…
(2 points)

a Metric variables

b Ordinal variables

c Nominal variables

d All types of data

What is the advantage of Spearman's rho over the Bravais-Pearson correlation Answer
1h
coefficient? (2 points)

a It is in most cases less significant, therefore more conservative

b It can be used for nominal data as well

c It can be calculated more easily

d It decreases the effect of outliers

Which of the following assumptions is not required for the OLS regression Answer
1i
model? (2 points)

a The disturbance terms are not correlated with the explanatory variables.

b x-values have been measured accurately

c y-values have been measured accurately

d The expected value of the disturbance terms is zero

5
 Assume you have 10 explanatory variables, each of which potentially has a
causal effect on the dependent variable, y. Under what conditions does omitting Answer
1j
one of these variable in a regression lead to (one or more) biased coefficient (2 points)
estimates?

a If the omitted variable is correlated with one of the explanatory variables

b If the omitted variable is correlated with the dependent variable

c If the p-value of the coefficient of the omitted variable, if it was included in the
regression, would be below 0.05

d None of the above conditions necessarily leads to biased coefficient estimates

Answer
1k Which of the following points is not a potential difficulty in multiple regression?
(2 points)

a Inaccurate functional form

b Irrelevant explanatory variables are included in the regression

c Explanatory variables are correlated

d None of the above mentioned

Answer
1l In the regression 𝒍𝒏(𝒚) = 𝜷𝟎 + 𝜷𝟏 𝒙 + 𝒖, what does 𝜷𝟏 indicate?
(2 points)

a The (approximate) percentage change in y resulting from a change of x by one unit

b The change in y resulting from a multiplication of x with e (2,718…)

c The elasticity of y with respect to x

d None of the above

6
 Which of the following indicators would you use to measure the goodness of fit Answer
1m
of a regression model? (2 points)

a Explained variance divided by total variance

b p-value of coefficients

c Significance (F-value) of the overall regression model

d Explained variance

Answer
1n The Herfindahl Index is a measure of…
(1 point)

a Industry concentration

b R&D intensity

c Innovativeness of an individual

d Goodness of fit in factor analysis

Consider a large population of units (e.g., firms), out of which a random sample
of N units is drawn. For each of these N units you determine two variables, x
and y (e.g., x = marketing expenditures and y = sales). You then perform an OLS
regression, 𝒚 = 𝜷𝟎 + 𝜷𝟏 𝒙 + 𝒖. The population coefficient 𝜷𝟏 is not known Answer
1o
precisely, but we do know that it is positive. Which of the following statements (2 points)
is correct?

If the sample size is increased from N to 2N, then one can expect that …

a R2 increases and the standard error of the estimator β̂1 remains unchanged.

b R2 increases and the standard error of the estimator β̂1 decreases.

c R2 remains unchanged and the standard error of the estimator β̂1 decreases.

d R2 and the standard error of the estimator β̂1 both remain unchanged.

7
 Which is not a suitable method to reduce the influence of social desirability Answer
1p
bias?
(1 point)

a Asking clear and unambiguous questions

b Guaranteeing anonymity

c Avoiding to phrase questions in a way that evoke moral obligations

d Asking projective questions, i.e. questions referring not to the respondent but to other
individuals

You want to study, and explain econometrically, the leadership quality of

managers. Your explanatory variables are age, gender, degree of education Answer
1q
(e.g., bachelor, master, Ph.D.), and the number of years in a leadership position.
(1 point)
Which of the following statements is correct? The study design suffers from…

a endogeneity issues and omitted variable bias

b endogeneity issues, but not omitted variable bias

c no endogeneity issues, but an omitted variable bias

d neither endogeneity issues nor an omitted variable bias

In a survey about company culture, you are asked to tick any of the following
statements that you find correct:

With most of my colleagues I would enjoy having a coffee. Answer

1r With most of my colleagues I would enjoy having dinner.
With most of my colleagues I would enjoy spending a weekend. (1 point)
With most of my colleagues I would enjoy spending vacations together.

What kind of scale is that?

a Likert scale

b Guttman scale

c Semantic differential

d None of the above

8
Question 2: Developing the research question and design (18 points)

In your master thesis you analyze the innovativeness of mid-sized companies.

a) How would you approach this topic with what you have learnt in the lecture? Develop a
meaningful approach. In doing so, use and explain the following terms (10 points):
 Research question
 Hypothesis
 Independent variable
 Dependent variable
 Operationalization

Research question:
Should be specific, new and, relevant. [1] State RQ [1]

Hypothesis:
Should be falsifiable [0.5] and generalizable [0.5] State hypothesis [1]

Independent variable:
The “input variable” [1] Name IV [1]

Dependent variable:
The “output variable” that is used to measure the effect [1] Name DV [1]

Operationalization:
Measuring of the concept that is not directly measurable [1] Give example for
operationalization of variable
[1]

9
b) After finishing your thesis your supervisor challenges your research. She uses the following
terms. Explain each term and how you could improve the quality of your work (6 points):
 Low significance
 Endogeneity
 Omitted variable bias

2P each (1P for explaining, 1P for improvement ideas)

Significance

In statistics, statistical significance (or a statistically significant result) is attained when a p-

value is less than the significance level. The p-value is the probability of observing an effect
given that the null hypothesis is true whereas the significance or alpha (α) level is the
probability of rejecting the null hypothesis given that it is true.

Improve: Increase N

Endogeneity

In a statistical model, a parameter or variable is said to be endogenous when there is a

correlation between the parameter or variable and the error term. Endogeneity can arise as a
result of measurement error, autoregression with autocorrelated errors, simultaneity and
omitted variables.

Improve: Measure omitted variable

Omitted variable bias

In statistics, omitted-variable bias occurs when a model is created which incorrectly leaves
out one or more important causal factors. The "bias" is created when the model compensates
for the missing factor by over- or underestimating the effect of one of the other factors.

Improve: Measure omitted variable

10
c) Assume that you have two samples of business data: the first sample covers complex technology
industries, the second one, discrete technology industries. You are interested in a number of
variables that relate to innovation. How can you evaluate if the means of these variables differ
between the two types of industries? Please explain. (2 points)

For each variable, conduct a two-sample, two-tailed t-test for a difference in means. [1]

H0 = mean is the same for discrete and complex technology industry [0.5]

H1 = mean differs between discrete and complex technology industry [0.5]

11
Question 3: Survey design (7 points)

a) What type of data can be measured with an ordinal scale? Provide an example. (2 points)

The ordinal scale allows for rank order by which data can be sorted, but there is no meaningful
distance between any two points on the scale. [1]

E.g., military ranks, exam grades [1]

b) What is a Likert-scale? Provide an example? (2 points)

Measures degree of agreement to a given statement. [1]

Common verbal anchors of a 5-level Likert scale: [1]

“strongly agree“, “agree“, “neither agree nor disagree“ (or “uncertain“), “disagree“, “strongly
disagree“

c) Under what conditions is unit-nonresponse (i.e., missing responses from some units in the
population) problematic? (3 points)

Unit-nonresponse is problematic if the missings are systematic – really random missings, in

contrast, do not cause problems. [1]

Systematic means that the characteristics of the object to be examined are related to the causes
of non-response. [1]

As a consequence, results are biased (e.g., (self) selection bias, survivor bias). [1]

12
Question 4: Cluster and factor analysis (18 Points)

You work for a sports car manufacturer that produces fast, appealing, and very expensive cars
with a high gas consumption. You want to conduct a marketing campaign for your new model.
You need to know more about your potential customers before you decide which customer group
you want to invite to the presentation of the new model. You conduct a cluster analysis. For the
clustering, you use three variables: age, income, and environmental consciousness.

a) Describe cluster analysis as well as factor analysis briefly and precisely. What is the
fundamental difference between the two methods? (3 points)

Cluster analysis:

Method to form groups of observation units. [1]

Factor analysis:

Method to form groups of variables. [1]

Fundamental difference:

The fundamental difference is which items are used to form groups.

Furthermore, the method differs. For the cluster analysis, a distance matrix is used. For the
factor analysis, a correlation matrix is used. [1]

13
 The result of the conducted cluster analysis is shown in the following table:

Cluster 1 (30%) Cluster 2 (20%) Cluster 3 (40%) Cluster 4 (10%)

Age [years] 22 67 29 46
(Average)
Income [thousand €] 14 60 45 80
(Average)
Environmental 45 20 55 70
consciousness
(Average)

Environmental consciousness was measured on a scale from 0 (not at all ecologically-minded)

to 100 (very ecologically-minded).

b) Describe the result of the cluster analysis. Give each cluster a meaningful name. Chose the
customer group that you want to invite to the presentation. (5 points)

Each:
Name [0.5]
Description [0.5]

Cluster 1 - Students: 30% of the observation units, young, low income, medium environmental
consciousness. Students

Cluster 2 – Retired persons: 20% of the observation units, old, high income, low environmental
consciousness.

Cluster 3 – Young professionals: 40% of the observation units, young, medium income,
medium environmental consciousness.

Cluster 4 – Employed persons: 10% of the observation units, medium age, high income, high
environmental consciousness.

Cluster 2 is the best customer group for sports cars. [1]

14
 In addition to the analysis above, you have two customer data sets available. You want to do a
factor analysis for each of the data sets. You determined the following correlation tables:

Dataset 1:

Variable 1 Variable 2 Variable 3 Variable 4 Variable 5 Variable 6

Variable 1 1
Variable 2 0,03 1
Variable 3 0,33 0,19 1
Variable 4 0,38 0,12 0,55 1
Variable 5 -0,09 -0,21 0,01 0,18 1
Variable 6 0,11 -0,54 0,13 0,12 -0,03 1

Dataset 2:

Variable 1 Variable 2 Variable 3 Variable 4 Variable 5 Variable 6

Variable 1 1
Variable 2 0,08 1
Variable 3 -0,06 0,15 1
Variable 4 0,04 0,61 0,01 1
Variable 5 0,54 0,03 0,001 0,14 1
Variable 6 0,04 0,22 0,012 0,08 0,07 1

c) Describe each dataset. State and justify if the datasets are suited for a factor analysis.
(4 points)

Each data set:

Statement [1]
Justification [1]

Dataset 1:

Well suited. Highly correlated variables.

Dataset 2:

Unsuited. With the exception of variables 2/4 and 1/5 very low correlation between the variables.
Heterogeneous data structure.

15
 What do you expect regarding the factors for dataset 1 if you choose a 3-factor Answer
4d
solution?
(2 points)

a One factor includes variables 1, 2, and 6 and no other variable

b One factor includes variables 2 and 6 and no other variable

c One factor includes variables 3, 4, and 5 and no other variable

d None of the above

Answer
4e Which statement is correct?
(2 points)

a A high value in the distance matrix indicates a high correlation between two
variables

b The factor loading gives a hint if the independent variable and the dependent
variable are correlated

c The factor loading of a variable is the correlation coefficient between this variable
and the factor

d A high value in the correlation matrix indicates a high correlation between two
factors

Answer
4f Which of the following three statements is not correct?
(2 points)

a In factor analysis, Cronbach’s alpha serves to assess reliability of factors

b Cronbach’s alpha determines the internal consistency of a factor through inter-item

correlations

c A value of Cronbach’s alpha above 0.7 indicates a sufficiently high level of validity of
the respective factor

d All of the statements above are correct

16
Question 5: Logistic regression (11 points)

You have completed the marketing campaign that was described in Question 5. The new model
has been on the market for six months and you would like to identify the determinants of the
decision to buy the sports car. To this end you conduct a survey among the guest of your market
presentation. For the evaluation of the survey, you use logistic regression analysis.

a) Briefly describe the fundamental idea of logistic regression. (2 points)

Logistic regression tries to determine the probability of a certain result and analysis which factors
influence this probability.

Dependent variable: Dummy-variable

Alternative: The logistic regression uses a non-linear relation between the probability of the
event and the independent variables.

You obtain the following regression table.

Variable Coefficient Standard error Significance

Education 0,210 0,180 0,244
Number of previously -0,050 0,018 0,005
bought sports cars
Single (dummy variable) 0,485 0,191 0,011
Life satisfaction -0,203 0,098 0,150
Constant 1,585 1,248 0,204

Answer
5b Which variables are significant at α=10%?
(1 point)

a Number of previously bought sports cars and Single

b Number of previously bought sports cars, Single, and the constant

c Education and Life satisfaction

d All variables are significant

17
c) Briefly describe the term “significant influence”. (2 points)

Significance is attained when a p-value is less than the significance level. The p-value is the
probability of observing an effect given that the null hypothesis is true whereas the significance
or alpha (α) level is the probability of rejecting the null hypothesis given that it is true. [1]

Influence implicates a causal relation. Often one can assume a distinct direction of causality.
[1]

Answer
5d Which statement is wrong?
(2 points)

a The Number of previously bought sports cars has a significant, positive influence on
the probability that the new sports car is bought

b Being Single has a significant, positive influence on the probability that the new sports
car is bought

c Education has a non-significant, positive influence on the probability that the new
sports car is bought

d None of the above

Answer
5e Which statement is correct?
(2 points)

a A Single buys on average 0,485 more sports cars

b The probability of buying the car is 48.5% higher for a single than for a non-single

c A Single is 48.5% more likely to buy the new sports car if all other variables are set to
0

d None of the above

18
 For your next market analysis about sports cars, you plan to include personal
characteristics of your potential customers. You are pondering how to Answer
5f
operationalize the respective constructs. Which of the following statements is
(2 points)
not correct?

a In a reflective construct operationalization, the indicators are fundamentally

exchangeable

b In a formative construct operationalization, the covariance between indicators may be

low

c In a formative construct operationalization, changes in the construct cause changes in

the indicators

d In a reflective construct operationalization, Cronbach’s alpha for the indicators should

be high

19
Question 6: Conjoint analysis (11 points)

A colleague approaches you and suggests to use a conjoint analysis to determine which
preferences the customers have regarding sports cars.

Answer
6a What is not an advantage of a conjoint analysis?
(1 point)

a More natural decision-making than a survey with Likert-type questions

b The number of attributes is reduced compared to a typical survey with Likert-type

questions

c K.O. criteria and tradeoffs are identified

d None of the above

Answer
6b Which of the following statements is not correct?
(2 points)

a Choice-based conjoint – i.e., to ask respondents to pick their most preferred conjoint
card out of each set – is preferable to full ranking because it is more realistic

b Asking respondents to assess each conjoint card on a rating scale from 1 to 100 is
more efficient than full ranking since it provides more information

Pair comparison – i.e., to ask respondents to pick their preferred alternative from
c several pairs of conjoint cards – has the disadvantages, compared to full ranking, of
allowing fewer attributes

d Hybrid conjoint techniques allow using more attributes than traditional full ranking
methods

20
c) State the two steps that are necessary before conducting a conjoint analysis. Explain these steps
in detail. (6 points)

1. Define attributes and attribute levels [0.5]

Number of attributes has to be limited

Number of attribute levels has to be limited
Attributes have to be relevant for the preference decision
Attributes have to be manipulable by the examiner
Attributes should be independent
Attribute values have to be feasible
Attribute values have to be in a compensatory relationship with each other
Considered attributes/attribute values must not constitute criteria for exclusion
Number of attributes and their values has to be finite

[0.5] each – max. [3]

2. Survey Design – Definition of Stimuli [0.5]

Stimulus: combination of attribute values [0.5]

- Profile method: stimulus consists of a combination of one value of each attribute [0.5]
- Two-factor method (trade-off analysis): only two attributes are included in the stimuli
and are compared pairwise [0.5]
Full design [0.5]
Reduced design [0.5]
- Random sample [0.5]
- Systematic selection / Latin square [0.5]

Answer
6d Which statement is wrong?
(2 points)

a The normalized importance sums up to 100% over all importance values

b The importance of an attribute is normalized

c The importance of an attribute is influenced by the selection of the attribute levels

d The importance of an attribute is the averaged importance of this attribute’s levels

21
Question 7: Time series and panel data analysis (16 points)

Three years passed since the new sports car model was introduced. You would like to analyze
the number of cars sold between February 2012 and February 2015 (37 months) and to forecast
future sales on a monthly basis.

a) In general, how do formulate a time series model? What is important to consider? (2 points)

Decomposition in components (additive [0.5] or multiplicative [0.5])

Use economic theory to formulate the model e.g:

Cyclic effects [0.5]

Seasonal effects [0.5]
Structural breaks [0.5]

Pay attention to auto correlation [0.5]

You use a linear model with seasonal dummies to estimate the model. This is the output from
SPSS:

Unstandardized Standardized
Coefficients
Coefficients
Regression
Model Coefficient B
Std.Error
(Constant)
Time (months)

Std. Error of
Adjusted the estimate
Model R-Square R-Square

22
 Answer
7b Which quarter is the reference category?
(1 point)

a Quarter 1

b Quarter 2

c Quarter 1, Quarter 2, and Quarter 3

d There is no reference category

Please calculate the point forecast for May 2015. How many cars do you expect Answer
7c
to sell in May 2015?
(2 points)

a 277 sports cars

b 130 sports cars

c 238 sports cars

d 234 sports cars

Answer
7d Which statement is wrong?
(2 points)

a The projection interval is the range where the future value of a variable is predicted to
be with a certain probability

b The projection interval depends on the forecast error at the point in time for which the
forecast is made

c The projection interval depends on the chosen confidence level

d All statements are correct

23
e) How would you assess the forecast quality of the model? Can you use R² for the assessment? Please
explain. (3 points)

Forecast quality:
The time period for the estimation is shortened compared to the observation time period. This means
that the last values are not used for the estimation of the model. Subsequently these values are
compared to the ex-post forecasted values. [1]
Another method would be to not to shorten the time period for the model estimation but wait for the
real values. [1]

R^2:
Not suitable for the assessment of the forecast quality. R^2 can only be used to analyze how well the
model fits the observed values in the observation period. [1]

Which statement regarding seasonal fluctuations in time series analysis is Answer

7f
wrong?
(2 points)

a Seasonal fluctuations can be included in the regression through dummy variables

b Y fluctuates around the long term trend and this fluctuation recurs periodically

c The number of degrees of freedom is smaller if monthly dummy variables are used
instead of quarterly dummy variables

d It is useful to use monthly dummy variables instead of quarterly dummy variables if the
observation period is short

24
g) Assume you have a panel dataset at hand. State four advantages of a panel dataset compared to a
time series. (2 points)

 Higher external and internal validity [0.5]

 Larger amount of data leads to more efficient model [0.5]
 Possibility to observe dynamic behavior [0.5]
 Control of latent heterogeneity (meaning unobservable effects that vary between observation
units) [0.5]
 Problems with omitted variables can be reduced [0.5]

Answer
7h Which statement, referring to panel regression, is wrong?
(2 points)

a Panel regression can be conducted also with discrete dependent variables and logit,
probit, or similar models

b Compared to a fixed effects regression, a random effects regression loses N degrees

of freedom and is thus less efficient

c A fixed effects regression has fewer degrees of freedom than a random effects
regression

d For determining the regression coefficients (betas), analyzing “first differences”

between successive periods has the same effect as including fixed effects.

25
Question 8: Guest lectures (9 points)

Which statement is wrong? Answer

8a
Behavioral economics…
(2 points)

a …is a mixture of psychology, economics, and sociology

b …is based on the concept of the Homo Oeconomicus

c …investigates where people deviate from rational behavior.

d …uses experiments in the research process.

Which statement is wrong? Answer

8b
The homo oeconomicus is characterized by…
(1 point)

a …unbounded rationality

b …pure self-interest

c …complete self-control

d …variable preferences

a) David Schindler conducted an experiment with you during his guest lecture. Describe the topic
of the experiment and describe how to interpret it. (4 points)

Beauty Contest Game:

• N persons choose a number between 0 and 100. [1]

• The person that is closest top m, whereas p>0 and m is the mean of the chosen numbers.
[1]

• Interpretation: The predicted behavior by game theory is not observed in reality.

- Participants do not behave fully rational [1]

- Participants do consider the restricted rationality of other participants [1]

26
b) During his guest lecture Dr. Florian Bauer presented a new model of price research. State two
points of criticism against conventional price management. (2 points)

Per point of criticism [1P]

 Starting point is the motivation of a Homo Oeconomicus (maximize benefit – minimize

payment)
 People do not decide rational but make predictable errors
 Traditional methods do not recognize the system behind human purchase decisions
 It is mostly about price assessment

27