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Vol. 21, No. 2, March–April 2010, pp. 540–553
issn10477039 eissn15265455 10 2102 0540
informs
®
doi 10.1287/orsc.1090.0464
©2010 INFORMS
A General Framework for Estimating
Multidimensional Contingency Fit
Simon C. Parker
Richard Ivey School of Business, University of Western Ontario, London, Ontario N6A 3K7, Canada,
sparker@ivey.uwo.ca
Arjen van Witteloostuijn
Department of Management, University of Antwerpen, Prinsstraat 13, 2000 Antwerpen, Belgium,
arjen.vanwitteloostuijn@ua.ac.be
T
his paper develops a framework for estimating multidimensional ﬁt. In the context of contingency thinking and the
resourcebased view of the ﬁrm, there is a clear need for quantitative approaches that integrate ﬁtasdeviation, ﬁtas
moderation, and ﬁtassystem perspectives, implying that the impact on organizational performance of series of bivariate
(mis)ﬁts and bundles of multiple (mis)ﬁts are estimated in an integrated fashion. Our approach offers opportunities to
do precisely this. Moreover, we suggest summary statistics that can be applied to test for the (non)signiﬁcance of ﬁt
linkages at both the disaggregated level of individual bivariate interactions, as well as the aggregated level of groups of
multivariate interactions. We systematically compare our approach with extant alternatives using simulations, including
the ﬁtasmediation alternative. We ﬁnd that our approach outperforms these established alternatives by including ﬁtas
moderation and ﬁtasdeviation as special cases, by being better able to capture the nature of the underlying ﬁt structure in
the data and by being relatively robust to mismeasurements, small sample sizes, and collinearity. We conclude by discussing
our method’s advantages and disadvantages.
Key words: contingency theory; multidimensional ﬁt; organizational performance
History: Published online in Articles in Advance July 28, 2009.
Introduction
The notion of alignment, congruence, ﬁt, or match (ﬁt,
for short) has been very popular in management stud
ies ever since the classic contingencytype studies of the
1960s. In the early contributions, the key logic was that
particular internal features of an organization, such as its
processes, structures, or technologies, are best suited to
particular types of environment or contingencies such as
complexity, dynamism, and uncertainty. The underlying
idea was that if the organization could indeed beneﬁt
from such a “ﬁt,” abovenormal or superior organiza
tional performance would be within reach. This argu
ment has been extended in different directions in the
past three decades. For example, with the emergence
of the strategic choice perspective (Child 1972), char
acteristics of strategies and strategymakers were intro
duced. Related to this, ideal “conﬁgurational” types were
developed, prominent examples being those of Miles and
Snow (1978) and Porter (1980). Additionally, this con
tingency or ﬁt logic has been applied to a wide array
of functional domains, varying from top management
team studies (Boone et al. 2004) to international business
(Luo and Park 2001). Contingency logic has penetrated
into other subdisciplines of management as well, such as
accounting (e.g., Hyatt and Prawitt 2001) and marketing
(e.g., Vorhies and Morgan 2003).
The underlying theoretical rationale is appealing
(Donaldson 2001). In their theoretical essay, Milgrom
and Roberts (1995) argue that complementarities across
organizational features are associated with abovenormal
performance; they apply ideas from the economic theo
ries of complementarity and supermodularity (for empir
ical work in this tradition, see Athey and Stern 1998,
Mohnen and Röller 2005). In a similar vein, Rivkin
(2000) develops a model of complexity that reveals
how the number of organizational elements and their
interactions are positively linked to the emergence and
sustainability of competitive advantages. Additionally,
he analyzes the downside of ﬁt: organizational inertia
(see Wright and Snell 1998). In a way, this implies
the argument that a static ﬁt may turn into a dynamic
misﬁt if the environment changes such that organi
zational adaptation—and hence ﬂexibility—is required
(see Zajac et al. 2000). This type of theoretical work is
closely aligned with the resourcebased view of the ﬁrm
because the complex and subtle interaction among sets
of organizational resources (Dierickx and Cool 1989,
and Donaldson 2000) is likely to produce a competi
tive advantage—and hence abovenormal performance—
that is difﬁcult to imitate or compete away (Barney
1991). Thus, modern organization theories conﬁrm the
early contingency logic that multivariate conﬁgurational
approaches are needed to explain performance differ
ences, in and over time.
The current paper adds to the large contingency
type of literature by proposing an econometric approach
540
Parker and van Witteloostuijn: General Framework for Estimating Multidimensional Contingency Fit
Organization Science 21(2), pp. 540–553, ©2010 INFORMS 541
for estimating a comprehensive, ﬂexible, robust, and
multidimensional notion of ﬁt. Although hundreds of
empirical studies have been carried out in the ﬁtrelated
tradition, the multidimensional conception of ﬁt is so
complex that empirical estimation is still anything but
easy, a situation that leads Burton et al. (2002, p. 1480)
to the conclusion that “[The concept of ﬁt] is less well
developed in terms of operational statements and empir
ical tests.” Our paper’s contribution is threefold. First,
we develop a general and ﬂexible multivariate contin
gency model of organizational performance that includes
different conceptions of ﬁt as special cases. In doing
so, we integrate ﬁtasdeviation, ﬁtasmoderation, and
ﬁtassystem perspectives in a quantitative framework,
including interaction (explicitly) and distance (implic
itly) measures of ﬁt in a general model speciﬁcation,
both individually and as bundles.
Second, we suggest summary statistics derived from
the model that retain in their construction informa
tion about the sources of ﬁt and that can distinguish
“genuine” ﬁt from random noise. Our approach can be
applied to test for the (non)signiﬁcance of ﬁt linkages
at both the disaggregated level of individual bivariate
interactions as well as the aggregated level of groups of
multivariate interactions. In this way, the impact on orga
nizational performance of series of bivariate (mis)ﬁts
and bundles of multiple (mis)ﬁts are estimated in an
integrated fashion.
Third, we systematically compare our method with
extant alternatives using Monte Carlo simulations. We
believe a comparative approach is especially valuable
given the plethora of different ﬁt methods now available.
As part of this approach, we also test the ﬁtasmediation
alternative. We ﬁnd that our method outperforms these
established alternatives by including ﬁtasmoderation
and ﬁtasdeviation as special cases; by being better able
to capture the nature of the underlying ﬁt structure in the
data; and by being relatively robust to mismeasurements,
small sample sizes, and multicollinearity. Of course, this
does not imply that our approach is always superior
or that our method does not come at any cost. Partic
ularly, the number of covariates increases rapidly if the
number of contingencies is expanded. Then, theory is
critical for the selection of a workable number of con
tingencies. The key is, we believe, a ﬁnding from our
simulation exercise, which shows that our approach is
the only one able to identify the underlying nature of
ﬁt. More broadly, we will reﬂect on the advantages and
disadvantages of our method in the appraisal.
The structure of the paper is as follows. The next sec
tion brieﬂy reviews ﬁt studies in order to position our
contribution in the context of the extant literature. The
one after develops our general model of organizational
performance, followed by the introduction of our mea
sure of ﬁt. The penultimate section presents the results
of comparative Monte Carlo simulations. In the ﬁnal
section, we offer an appraisal and conclusion, brieﬂy
reﬂecting upon how our general framework for measur
ing ﬁt relates to the broader literature, including alter
native approaches and the different traditions, and the
implications for organizational scientists.
Background Literature
A classic conceptual contribution to the empirical ﬁt
literature is Venkatraman (1989). He discusses three
criterionspeciﬁc perspectives of ﬁt: ﬁt as moderation,
ﬁt as mediation, and ﬁt as proﬁle deviation. The medi
ation ﬁt approach differs from the moderation one in
that the former, contrary to the latter, is based upon a
system of (generally two) equations. For example, the
mediation approach ﬁrst models strategy as a function of
structure and, subsequently, performance as a function
of strategy (see, e.g., Boone et al. 1996). In the mod
eration approach, using the same example, performance
is modeled as a function of strategy and structure in a
single equation. The moderation ﬁt concept relates to
interaction effects. The argument is that if variables x
and x jointly produce a positive ﬁt, their product term
x  x will affect performance positively (and vice versa,
in the case of a misﬁt). Strictly speaking, there can be
any number of variables in the interaction term; but in
practice, by far the majority of ﬁt studies are limited to
bivariate interactions, with an occasional exception of a
limited number of threeway interactions (see, e.g., Garg
et al. 2003). The proﬁle deviation ﬁt notion relates to
bundles of multiple variables. Here, the logic is that for
a conﬁguration of variables (x
1
. . . . . x
n
. x
1
. . . . . x
n
) a set
of their levels is linked to organizational performance
(or any other criterion variable, for that matter) as a set
rather than as a series of separate bivariate relationships.
In this tradition, a popular method is to calculate devia
tion measures that capture the distance of a ﬁrm from an
idealtype conﬁguration, the hypothesis being that this
distance is negatively associated with organizational per
formance (see, e.g., Vorhies and Morgan 2003).
From this brief overview, we conclude that two
aspects are key to distinguishing one criterionspeciﬁc
ﬁt approach from another. The ﬁrst one contrasts ﬁt as
moderation with ﬁt as deviation (see Donaldson 2001).
Fit as moderation captures (mis)ﬁt in the form of prod
uct terms of the contingency variables—say, x  x; ﬁt as
deviation measures misﬁt by calculating the distance of
the actual value of a contingency variable from its ideal
type—say, (x −x
∗
)
2
, where x
∗
is the ideal type’s value
of x (e.g., the value of x that is associated with maxi
mum performance). Second, ﬁt approaches may focus on
the individual contribution to performance of each and
every contingency variable, or on the joint contribution
of a bundle of contingency variables. In the terminol
ogy of Drazin and Van de Ven (1985), the latter may be
referred to as the ﬁtassystem approach. In the current
Parker and van Witteloostuijn: General Framework for Estimating Multidimensional Contingency Fit
542 Organization Science 21(2), pp. 540–553, ©2010 INFORMS
paper, we develop the socalled general interaction (GI)
approach that integrates all three conceptions of ﬁt—i.e.,
ﬁt as moderation, ﬁt as deviation, and ﬁt as system.
To explore this, we compare the GI approach to four
typical examples from the literature, each representing
a relatively “pure” example of an empirical approach
to measure ﬁt as moderation, deviation, mediation, and
system. First, many ﬁtasmoderation studies introduce
a series of (generally bivariate) interaction terms. Our
typical example is Skaggs and Ross Huffman (2003).
Second, deviation ﬁt studies tend to calculate the dis
tance of a focal ﬁrm visàvis an idealtype conﬁg
uration by computing multivariate (squared) Euclidian
distances measures. We take Vorhies and Morgan (2003)
as a typical example. Third, in the advanced ﬁtas
mediation tradition, (standardized) residuals from a
ﬁrststep regression are entered into a secondstage
performance equation. We focus on Zajac et al. (2000)
as a sophisticated case in point. Fourth, system ﬁt studies
often introduce individual and sum dummy measures of
(mis)ﬁt. Our benchmark is Burton et al. (2002, 2003).
1
A Model of Organizational Performance
Let I, E, and S denote three sets of variables, namely
internal (organizational), external (environmental), and
strategy variables, respectively.
2
Each set contains at least
one variable. There are n
I
variables in I, where each vari
able in I is denoted by x
i
; i.e., I = ]x
1
. x
2
. . . . . x
n
I ] ≡
]x
i
]
n
I
1
. Each variable in E is denoted by x
]
, and each
in S by z
k
, with E = ]x
]
]
n
E
1
and S =]z
k
]
n
S
1
. Without
losing generality, all variables are measured in natu
ral logarithms: This makes the scale of measurement of
the performance and explanatory variables irrelevant and
enables the use of the general translog function deﬁned
below. It is also assumed that the researcher has already
chosen these variables for their potential usefulness for
explaining variations in a given measure of ﬁrm perfor
mance, ¡ (also measured in logs). Hereafter we refer to
all variables apart from ¡ as “explanatory variables.”
At the outset, we deﬁne “ﬁt” in terms of the extent
to which the explanatory variables as pairs or as bun
dles affect ¡. A ﬁt may be either beneﬁcial or harmful
for ﬁrms. For example, phrased in the ﬁtasinteraction
tradition, a positive ﬁt between two variables involves
them interacting in a way that enhances performance,
whereas a negative ﬁt has the opposite impact. In the
literature, negative ﬁt is often referred to as “misﬁt.”
An absence of ﬁt is also possible, arising (in a heuristic
sense) if there is zero covariance between performance
and a given pair or bundle of explanatory variables. After
describing our model of performance, we will deﬁne ﬁt
more precisely, also showing how distancebased mea
sures of ﬁt are nested in our approach.
Below we use an extension of the general translog
(TL) function to propose a GI model of (log) ﬁrm
performance, ¡. The TL function is well known for its
generality and ﬂexibility. It approximates any functional
relationship between ﬁrm performance on the one hand
and a given set of explanatory variables on the other.
Formally, it provides a secondorder Taylor approxi
mation to any functional relationship, which means it
approximates any performance equation as a series of
terms involving increasing powers of the variables, up
to the second order.
3
The practical importance of this
point is that any measure of ﬁt will only be appropriate
if it is based on a suitable underlying model. Because
the researcher rarely if ever knows the true relationship
between performance and its determinants, it is therefore
desirable to utilize a speciﬁcation that is general enough
to encompass (at least to a secondorder approximation)
any that may exist. This ﬂexibility is a key advantage
of the GI approach. Hence our use of the TL function.
Moreover, as we will show below, the TL speciﬁcation
offers a way to integrate the ﬁt as moderation (FAM)
and the common symmetric approaches to ﬁt as devia
tion (FAD) into a single tobeestimated equation.
The GI model can be written as
¡ = m+
n
I
i=1
(o
iI
x
i
+8
iI
x
2
i
) +
n
E
]=1
(o
]E
x
]
+8
]E
x
2
]
)
+
n
S
k=1
(o
kS
z
k
+8
kS
z
2
k
) +
i
=i
8
ii
I
x
i
x
i
+
]
=]
8
]]
E
x
]
x
]
+
k
=k
8
kk
S
z
k
z
k
+
n
I
i=1
n
E
]=1
~
i]IE
x
i
x
]
+
n
I
i=1
n
S
k=1
~
ikIS
x
i
z
k
+
n
E
]=1
n
S
k=1
~
]kES
x
]
z
k
+
n
I
i=1
n
E
]=1
n
S
k=1
o
i]k
x
i
x
]
z
k
. (1)
where the os, 8s, ~s, and os are coefﬁcients that will
be interpreted in the remainder of this section. This will
include an explanation of how (1) is an extension of the
conventional TL function.
4
Apart from an intercept m—which takes care of scal
ing issues—performance may be affected by three
broad categories of factors. One category comprises
the ﬁrst three sums of (1). We will call the compo
nents of these sums individual determinants of perfor
mance. Note that these terms also happen to capture the
commonly applied symmetric FAD speciﬁcation of ﬁt
because the FAD speciﬁcation ¡ = o
0
+o
1
(x −x
∗
)
2
+
o
2
(x −x
∗
)
2
+o
3
(z −z
∗
)
2
can be rewritten as
5
¡ =m+o
I
x +8
I
x
2
+o
E
x +8
E
x
2
+o
S
z +8
S
z
2
. (2)
which is evidently a special case of (1). Viewed this way,
the GI model implies an integrated method for estimat
ing both FAD and FAM types of ﬁt. Below, the focus of
Parker and van Witteloostuijn: General Framework for Estimating Multidimensional Contingency Fit
Organization Science 21(2), pp. 540–553, ©2010 INFORMS 543
interest, as in the FAM approach, relates to the remain
ing terms of (1), i.e., to the interactions among variables.
This is not to say that the individual (main and squared)
effects are not important—they are. This is not only
because they implicitly capture symmetric FAD but also
because in order to understand the effect of a bundle of
variables one needs to understand the individual effects
as well (Cappelli and Neumark 2001). There are two cat
egories of such interaction terms in model (1), which we
will refer to as withingroup ﬁt and (dual and multiple)
betweengroup ﬁt determinants of performance. Next we
identify each of these two categories with the relevant
terms of (1) and explain their nomenclature and ratio
nale. Table 1 provides a summary for clarity and ease of
reference.
The fourth, ﬁfth, and sixth sums of (1) capture within
group ﬁt measures. Thus, the 8
ii
I
coefﬁcients capture
all possible dual (bivariate) interactions among variables
within the set of internal ﬁrm variables, I. For exam
ple, if an owner’s experience (x
1
, say) is more pro
ductive in a ﬁrm with a centralized decisionmaking
structure (x
2
, say), then one might expect performance
to be positively related to x
1
x
2
: i.e., we would expect to
see 8
12I
>0.
6
This would be indicative of a positive ﬁt.
A similar interpretation applies to the other two sums,
which relate to interactions among variables within the
external variable set and within the strategy variable set.
The ~ coefﬁcients (in the seventh, eighth, and ninth
sums of (1)) capture all possible dual interactions
between variables in different variable groups. For exam
ple, consider an incumbent ﬁrm that faces a more
dynamic, competitive environment as a result of a rival
entering the market with a novel differentiated prod
uct. Suppose variable x
1
captures this aspect of the new
competitive environment. At the same time, the incum
bent ﬁrm pursues a strategy z
1
of lowcost competition.
The variables x
1
and z
1
come from different variable
Table 1 Summary of Determinants of Performance
Name Terms of GI model Description
A. Relating to ﬁt as deviation
Individual effects
n

i =1
o
i 
x
i
+3
i 
x
2
i
j
n
E
¡=1
o
¡E
y
¡
+3
¡E
y
2
¡
j
n
S
k=1
o
kS
z
k
+3
kS
lnz
2
k
j
Individual effects on
performance
B. Relating to ﬁt as moderation
Withingroup ﬁt
i
=i
3
i i

x
i
x
i
¡
=¡
3
¡¡
E
y
¡
y
¡
k
=k
3
kk
S
z
k
z
k
Dual interactions
between variables
within the groups
Betweengroup ﬁt
n

i =1
n
E
¡=1
v
i¡E
x
i
y
¡
n

i =1
n
S
k=1
v
ikS
x
i
z
k
n
E
¡=1
n
S
k=1
v
¡kES
y
¡
z
k
n

i =1
n
E
¡=1
n
S
k=1
o
i¡k
x
i
y
¡
z
k
Dual interactions
between variables
across groups
Multiinteractions
across groups
groups (E and S, respectively), so betweengroup ﬁt
is suggested. In this example, we might expect ~
11ES
(in the ﬁrst sum on the last line of (1)) to be nega
tive, reﬂecting a deterioration in the incumbent ﬁrm’s
performance. This would be indicative of a negative ﬁt
or misﬁt between this strategy and this feature of the
external environment. On the other hand, let z
2
be the
strategy of “enter now” for a new entrant and let x
2
be a
variable capturing the environmental condition of “less
advertising by a rival.” Then we might expect these two
variables to have a positive ﬁt impact on the performance
of a new entrant, implying ~
22ES
>0 for such ﬁrms.
In contrast, the coefﬁcients o
i]k
[in the ﬁnal sum
of (1)] capture the importance of any multiple interac
tions between members of the three groups of variables.
These terms actually constitute an extension to the con
ventional TL function commonly used in the economics
literature. In a mathematical sense, the terms capture
part of a thirdorder approximation to any general per
formance function; but in the present context, its ratio
nale is to represent multiple interactions across the three
groups of variables, as explained below. Something akin
to these threeway interactions recently appeared in an
important paper by Cassiman and Veugelers (2006).
An example might help at this point. Imagine, for
instance, that following a particular strategy (e.g., z
3
)
in the face of a particular environmental opportunity
(e.g., x
3
) only translates into better performance if the
ﬁrm has in place a particular aspect of internal orga
nization (x
3
, for example). Then the dual ﬁt between
x
3
and z
3
is ineffective as far as performance is con
cerned, i.e., ~
33ES
=0, whereas in conjunction with x
2
,
performance is enhanced, so o
333
> 0. Thus, the mul
tiple betweengroup ﬁt terms capture any performance
enhancing interactions that require elements of all three
of internal, external, and strategic elements to be present
simultaneously.
Measuring Fit
The foregoing has talked loosely of “ﬁt” within and
between components of I, E, and S. We now propose a
more formal way of measuring ﬁt. Speciﬁcally, we will
propose a statistic that captures ﬁt through bundles of
interaction terms. In so doing, we integrate the ﬁtas
system approach into the GI method. Our starting point
is the observation that, in practice, all models of perfor
mance estimated from sample data are subject to sam
pling error, so it is important to have measures of ﬁt that
are robust to this problem. In addition, we seek to quan
tify signiﬁcance and importance irrespective of the sign
of its effects (because ﬁt can have positive and misﬁt
negative effects on performance) and in a way that can
be assessed for statistical robustness.
A convenient measure of ﬁt that satisﬁes these two
properties is the statistical concept of the incremental
Parker and van Witteloostuijn: General Framework for Estimating Multidimensional Contingency Fit
544 Organization Science 21(2), pp. 540–553, ©2010 INFORMS
contribution (IC) of the various sums in (1). As will be
explained more formally below, IC is the extent to which
a bundle of variables as a group contributes statisti
cally to explaining crossﬁrm variations in performance.
In this way, the signiﬁcance of any individual contribu
tion of bivariate (mis)ﬁts and the overall contribution of
bundles of (mis)ﬁts can be estimated in an integrated
framework (see Burton et al. 2002, p. 1479). Not only
does this enable the researcher to distinguish genuine ﬁt
from random noise such as measurement error, but also
it enables ﬁt to be evaluated at different levels of aggre
gation. The researcher might, for example, be interested
in checking not only whether the individual sums com
posing “withingroup ﬁt” are important aspects of ﬁt but
also whether their aggregate sum is, too. The latter indi
cates whether withingroup ﬁt as a whole is a coherent
aggregate measure of ﬁt. In a similar manner, we might
be interested in assessing whether aggregate “between
group ﬁt” is also a coherent entity, by combining all four
sums making up the betweengroup ﬁt entry in Table 1.
Statistical Framework and Incremental
Contribution
In order to deﬁne IC formally, we require a statisti
cal model of performance, ¡
t
, where t (t = 1. . . . . T )
indexes the particular ﬁrm t from the total of T ﬁrms
in the sample. For convenience, write the sample equiv
alent of the righthand side (RHS) of (1) in compact
matrix form as
¡
t
=W
t
l +u
t
. (3)
where ¡
t
is a column vector of log ﬁrm performance
for all T ﬁrms in the sample; W
t
is a (k ×T ) matrix
containing unity and all of the (k − 1) variables on
the RHS of (1) (i.e., 1. ]x
it
]
n
I
1
. ]x
]t
]
n
E
1
. ]z
kt
]
n
S
1
, and their
interactions); l is the vector of associated coefﬁcients
(i.e., m and every o, 8, ~, and o coefﬁcient); and u
t
is
a vector of errors, with mean zero and variance u
2
.
This is a standard regression model, which can be
estimated by ordinary least squares (OLS). Further
more, it is easy to test linear restrictions. All mod
ern software packages compute E statistics of r linear
restrictions, denoted by E (r. T −k). For example, sup
pose that one wanted to test whether the dual interac
tions of the I variables were jointly insigniﬁcant. This
implies r =n
I
(n
I
−1)¡2. Then the wellknown E statis
tic E (r. T −k) forms the basis of our measures of IC.
Consider the following statistics:
W=
T
T −k
rE (r. T −k). (4)
LR =T ln
1 +
1
T −k
rE (r. T −k)
. (5)
LM=
T · rE (r. T −k)
(T −k)
1 +
1
T −k
rE (r. T −k)
. (6)
These are three largesample tests based on the E
statistic, called the Wald (W), likelihood ratio (LR), and
Lagrange multiplier (LM) tests, respectively. They all
follow a +
2
(r) distribution under the null hypothesis
that the dual interactions of the I variables are jointly
insigniﬁcant. Asymptotically, i.e., as T → , values
of W, LR, and LM converge. In small samples, we have
the ordering W≥LR ≥LM (see, e.g., Greene 2003, for
a proof).
Each of these three statistics is a valid measure of IC.
They can be used to measure ﬁt for any of the sums in
Table 1. All that is needed is to impose the zero restric
tions on the terms whose IC is being tested and then to
compute the above statistics with r deﬁned accordingly.
Hence these statistics are easy to compute in practice.
Panel A of Table 2 summarizes the IC statistics this pro
cedure gives rise to, where subscripts on the +
2
statistics
indicate the type of ﬁt being measured. Higher values of
the IC statistics indicate a greater statistical impact on
performance from the speciﬁed interactions, irrespective
of whether its individual components affect performance
positively or negatively. Values that exceed the epoint
“critical value” from the +
2
(r) distribution suggest that
one can be 100×(1−e) percent conﬁdent that the aspect
of ﬁt being tested is not just random noise.
Notice that the IC statistics deﬁned above do not
depend on the signs of the coefﬁcients, but instead upon
their statistical ability to affect performance; they are
symmetrical in this respect. Hence the IC statistics can
detect ﬁt or misﬁt—i.e., whether interactions are most
or least beneﬁcial for performance. In practice, the esti
mated coefﬁcients of (1) should also be cited along
side the IC statistics because they measure the economic
Table 2 Summary of GI Fit Statistics
Measure Degrees of freedom Description
A. Separate ﬁt statistics
+
2

n

(n

−1)¡2 Fit within  variables
+
2
E
n
E
(n
E
−1)¡2 Fit within E variables
+
2
S
n
S
(n
S
−1)¡2 Fit within S variables
+
2
E
n

n
E
Dual ﬁt between  and
E variables
+
2
S
n

n
S
Dual ﬁt between  and
S variables
+
2
ES
n
E
n
S
Dual ﬁt between E and
S variables
+
2
ES
n

n
E
n
S
Multiple ﬁt between
the variables
B. Aggregate ﬁt statistics
+
2

++
2
E
++
2
S
n

(n

−1) +n
E
(n
E
−1) Total withingroup ﬁt
+n
S
(n
S
−1)j¡2
+
2
E
++
2
S
++
2
ES
n

(n
E
+n
S
) +n
E
n
S
(1+n

) Total betweengroup ﬁt
++
2
ES
+
2

++
2
E
++
2
S
n

(n

−1) +n
E
(n
E
−1) Grand overall ﬁt
++
2
E
++
2
S
+n
S
(n
S
−1)j¡2+n

·
++
2
ES
++
2
ES
(n
E
+n
S
) +n
E
n
S
(1+n

)
Parker and van Witteloostuijn: General Framework for Estimating Multidimensional Contingency Fit
Organization Science 21(2), pp. 540–553, ©2010 INFORMS 545
(rather than the statistical) signiﬁcance of interactions.
Both will be cited in our numerical illustration below.
Two questions arise at this point. Why use the three
statistics (4), (5), and (6) instead of E (r. T −k)? And
which of the three statistics should be used in prac
tice? These questions are addressed in the two subsec
tions that follow. As we will see next, the answer to the
ﬁrst question is based on a convenient additive property
of the +
2
distribution, which permits easy aggregation
and disaggregation of IC ﬁt measures across categories.
Then we show that the answer to the second question is
an empirical one, informed by Monte Carlo simulations
relating to size and power of the statistics.
Aggregation and Disaggregation
As well as computing the seven IC ﬁt measures cor
responding to the seven sums in Panel B of Table 1,
obtaining more aggregated measures of ﬁt might also be
of interest. This is easily done by performing joint sig
niﬁcance tests on every sum we are interested in. By the
additive property of +
2
distributions, an asymptotically
equivalent (and much simpler) procedure is to add up the
individual +
2
IC statistics corresponding to these sums.
See Panel B of Table 2 for a summary of these aggregate
ﬁt measures and their degrees of freedom.
For illustrative purposes, let us return to the case of
the ﬁrst sum of Panel B in Table 1. Suppose one were
to ﬁnd a mixture of positive and negative components in
the sum and wanted to measure separately ﬁt attributable
to positive components and misﬁt attributable to nega
tive components. Our approach can also accomplish this
by exploiting the additive property of +
2
distributions.
To see this, let v  n
I
(n
I
−1)¡2 be the number of pos
itive interactions and n ≤ ]n
I
(n
I
− 1)¡2] − v] be the
number of negative ones []n
I
(n
I
−1)¡2] −(v +n) ≥0
is the number of zero interactions]. Then calculate the
IC measure for just positive interactions, say. This is dis
tributed as +
2
with v degrees of freedom. The IC mea
sure for negative ones only is distributed as +
2
with n
degrees of freedom. Clearly, any of the sums in Table 1
can be disaggregated in this fashion.
Monte Carlo Simulations on the IC Statistics
Because W≥LR ≥LM, it follows that if LM indicates
statistically signiﬁcant ﬁt, or if W indicates insigniﬁcant
ﬁt, there will be no conﬂict between the different IC
ﬁt measures. So when assessing whether ﬁt is signiﬁ
cant, LM can be regarded as the most “conservative”
in the sense that this statistic will indicate signiﬁcant ﬁt
less frequently than the other two. Inference becomes
less clear, however, if the three statistics give differ
ing results. In our examples below, that problem does
not arise; to address this issue more generally, we per
formed Monte Carlo simulations to evaluate the perfor
mance of the statistics in order to improve our ability to
discriminate between them and make secure inferences
in cases when the three IC statistics disagree (results
available upon request). The simulation results were
based on 10,000 bootstrapped draws from the residuals
of the translog performance model, where 1 irrelevant
variables drawn from independent standard normal dis
tributions were used to test for size. This does not “pre
determine” our results to mirror those from our example,
as the bootstrapping does no more than to sample ran
domly from some (nonparametric) distributed random
variable. Several simulations were performed for var
ious combinations of 1 and the sample size, N. All
three +
2
statistics were reasonably well sized, even in
small samples, although LM has the best size properties
overall. Notably, the LM does especially well for the
case of larger numbers of restrictions on the irrelevant
variables, 1 . But before reaching any conclusions about
the choice of a preferred statistic in cases where they
disagree, we also need to evaluate the power properties
of the statistics.
With the simulation results, we checked the ability
of the three IC statistics to correctly reject a false null
hypothesis that 1 truly relevant explanatory variables
are actually irrelevant. Again, the Monte Carlo simu
lations were performed based on bootstrapped residu
als from the ﬁt model. The results show that there is
little to choose between the three statistics in terms
of power. Reasonable power is obtained for all of the
restrictions considered given a sample size of 100 or
more. As 1 increases, power goes to 1.00 as we move
up the power curve; i.e., for any given o, the wrong
null hypothesis is increasingly untenable. In general, it is
well known that absolute power values are less interest
ing than relative values based on comparisons between
the performance of the statistics. Overall, based on these
simulation results, we recommend that researchers either
cite all three IC statistics or, if only one is to be used,
select the LM statistic. The LM has the best size proper
ties, and good power properties. Moreover, as the most
conservative statistic it is also the least likely to overstate
occurrences of genuine ﬁt in practice.
Comparison of the Approaches
by Simulation
To provide an illustrative comparison between our GI
ﬁt approach and others proposed in the literature, the
following variables were deﬁned: two I variables x
1
and x
2
, one E variable x, and one S variable z. This
restriction to a set of four variables is done for the
sake of convenience, without affecting the validity of
the comparative analysis that follows. Deﬁne the vector
v := (x
1
. x
2
. x. z), where each variable is measured in
natural logarithms. For each variable, 100 observations
were randomly generated from a uniform distribution
with support 0. 10]. The results below are insensitive
to this (essentially arbitrary) choice of random number
generator.
Parker and van Witteloostuijn: General Framework for Estimating Multidimensional Contingency Fit
546 Organization Science 21(2), pp. 540–553, ©2010 INFORMS
In principle, the GI method belongs to the ﬁtas
moderation approach, although our speciﬁcation (1) also
implicitly captures FAD elements based on symmetric
distance measures, as explained above. The key dif
ference between the GI approach and distancebased
FAD alternatives is that the latter explicitly calculate
deviations from ideal types, whereas such ideal type
deviations (when expressed symmetrically, at least) are
implicitly nested in our GI speciﬁcation. As noted in
the literature review, this explicit FAD conceptualiza
tion is the principal alternative approach to the FAM
notion. The explicit FAD approach measures misﬁt as
some function of the squared deviation of v from an
“ideal” proﬁle, which is denoted by v
∗
. Common FAD
functions include the identity function (used below for
simplicity) and the square root function (giving rise to
the Euclidean distance). The results below do not depend
on which function is chosen.
In what follows, we will consider various ﬁt mea
sures that are common versions of the FAM or the
FAD approach. To enable a fair comparison to be made
between different ﬁt approaches, two data generation
processes (DGPs) are used, one corresponding to the
FAM and one to the FAD approach. A DGP is an equa
tion that generates data on performance outcomes as a
mixture of deterministic and stochastic inﬂuences. The
use of two different DGPs enables one to assess the
sensitivity of different approaches to the underlying per
formance datageneration process.
Log performance is denoted by ¡; its values were
computed using one or other of the following DGPs:
¡ =−
1
2
x
1
x
2
−x
2
xz +w. (7)
¡ =−
1
4
(v −v
∗
)
(v −v
∗
) +w. (8)
where w is a vector of 100 independent random draws
from the normal distribution with mean 0 and variance 3.
There are no special implications of using this particular
distribution of w, although we note that a higher vari
ance would inject greater noise into the DGPs, which
makes it harder for any model to ﬁt the data well.
Key is that Equation (7) reﬂects a FAM datageneration
process and Equation (8) a FAD one. By working
with both (7) and (8), we can explore the comparative
strengths and weaknesses of FAM and FADbased esti
mation approaches, or any other, in dealing with both
types of underlying data.
More speciﬁcally, the key question explored in this
section is the robustness of ﬁt approaches to four dif
ferent problems that can arise in realworld applications.
One question is the robustness of the approaches to
a different DGP than the one typically assumed. For
instance, does the GI approach capture FAD sources
of ﬁt, as generated by (8), and how does this compare
to explicit FAD distancebased estimation approaches
prominent in the literature? A second question relates to
the robustness of the approaches to mismeasurement of
the variables in v. For example, is the GI approach more
or less sensitive to variable mismeasurement than the
alternative approaches? A third question is how robust
the various approaches are to the use of small sample
sizes, in conjunction with the number of contingencies
included. After all, the GI approach does seem to be
demanding in this respect by including numerous inter
action terms. Finally, a fourth question involves robust
ness to multicollinearity. This is particularly pertinent
for the GI approach (and other FAM approaches, for that
matter) because it might include numerous highly cor
related main and interaction terms in a single equation.
Robustness of inference to these four problems is taken
to be a desirable property of ﬁt approaches in what fol
lows. To the best of our knowledge, researchers have not
yet explored comparative robustness properties of differ
ent ﬁt approaches. Yet in practice, some or all of these
problems may be commonplace.
The next subsection considers the case where per
formance is determined by the GI DGP (7). We ﬁrst
illustrate the GI approach in practice and show that
it accurately represents the DGP when random noise
w is present. To address the ﬁrst robustness issue, we
then go on to explore the performance of alternative ﬁt
approaches using the same DGP. The question here is
whether alternative approaches can also track the data
well and detect the structure of ﬁt or misﬁt when the
data are generated by a DGP (7). To provide a fair basis
for comparisons, the second subsection treats the case
where performance is determined by the FAD DGP (8).
We ask how robust the GI approach is to the differ
ent DGP. The third subsection treats the three remaining
robustness issues for both FAM and FAD approaches,
namely, robustness of the different approaches to mis
measurement of the variables in v, to the use of small
sample sizes, and to instances of collinearity. The ﬁnal
subsection assesses the costs and beneﬁts of the various
approaches.
We compare our GI approach to four typical examples
of alternative approaches, as explained in the literature
review section above. The ﬁrst is Vorhies and Morgan
(2003). They use an explicit FAD approach, applying a
twostep procedure by, in the ﬁrst step, estimating ideal
types on the basis of average values for the contingency
variables for the top 10% of performers and in the sec
ond step including Euclidian distance measures in a per
formance equation estimated for the remaining 90% of
the sample. The second alternative is from Skaggs and
Ross Huffman (2003). They apply the standard FAM
method, including a limited number of bivariate inter
action terms in their performance model. Third, Burton
et al. (2002) suggest a ﬁtassystem method. They deﬁne
a series of dummy misﬁt variables that make up the
key explanatory variables in a performance regression.
Fourth, Zajac et al. (2000) develop a ﬁtasmediation
Parker and van Witteloostuijn: General Framework for Estimating Multidimensional Contingency Fit
Organization Science 21(2), pp. 540–553, ©2010 INFORMS 547
methodology. They suggest a twoequation estimation
procedure, where the residuals of the ﬁrst (mediation)
regression are the key explanatory variables in the sec
ond (performance) model.
Comparisons Based on a GI DGP
The regression results from estimating the GI model
using DGP (7) are presented in column 1 of Table 3.
IC statistics measuring ﬁt are reported in Panel A of
Table 4. Recall from (7) that all and only the withinx
term x
1
x
2
and the multipleﬁt term x
2
xz should be sta
tistically signiﬁcant. Because the DGP follows the GI
structure, it is no surprise that the results show this to be
the case, with signiﬁcant IC statistics for these interac
tions but none for the others.
7
The coefﬁcient estimates
are also close to their “true” values of −0.50 and −1.00.
We next ask what happens when alternative ﬁt ap
proaches are applied to these data. We start with
column 1 of Table 5, which presents the outcome of
implementing the Vorhies and Morgan (2003) FAD
approach to measuring ﬁt. This involves, ﬁrst, estimating
v
∗
as average values of v sampled from the top 10% of
performers to obtain ˆ v
∗
; second, computing a Euclidean
distance measure deﬁned as D =(v
]
− ˆ v
∗
)
(v
]
− ˆ v
∗
) for
the remaining 90% of the sample; and third, regressing
performance ¡ on D using the speciﬁcation
¡ =o
0
+o
1
D+e. (9)
where e is a disturbance term. According to Vorhies
and Morgan (2003), misﬁt is detected when o
1
is neg
ative and signiﬁcant.
8
This prediction is borne out by
the results presented in column 1 of Table 5, suggest
ing that the Vorhies and Morgan (2003) approach does
indeed detect the existence of FAMgenerated ﬁt when
it is present. Furthermore, the approach is superior to
randomly choosing v
∗
(corresponding perhaps to incor
rect theoretical priors), as can be seen in simulations
(not reported here) where no signiﬁcant effects from D
emerge. However, the Vorhies and Morgan method also
suffers from important drawbacks. It cannot identify the
nature of ﬁt (i.e., FAM or FAD) and so cannot isolate the
true determinants of what makes ﬁt work. The adjusted
R
2
in column 1 of Table 5 is also low compared with
that of column 1, Table 3, reﬂecting the large amount of
structure not being exploited by this method.
Consider next the bivariate interaction approach,
which has dominated the FAM approach in the liter
ature to date. A typical example is Skaggs and Ross
Huffman (2003). Column 2 of Table 3 presents results
of including only bivariate interactions and excluding all
multiple interactions in (1). The corresponding IC statis
tics appear in Panel B of Table 4. The restrictions of
only bivariate interactions are statistically inadmissible
(E =6.578: ¡  0.0001). Reﬂecting this, the IC statis
tics in Panel B of Table 4 differ markedly from those in
Table 3 Estimates of the GI Performance Model
Variable (1) (2) (3) (4) (5) (6)
Constant 6.95 79.30
∗
180.16
∗
−14.53
∗
−1.04 3.24
(1.33) (13.04) (3.50) (4.51) (0.22) (0.21)
x
1
−0.71 −12.42 −0.34
∗
−0.70 −0.46
(0.70) (0.34) (2.04) (0.76) (0.12)
x
2
1
−0.08 −8.57 −0.04 0.01 −0.09
(1.34) (0.84) (0.50) (0.11) (0.42)
x
2
0.13 −0.92 0.72
∗
0.43 −0.43
(0.16) (0.08) (3.33) (0.58) (0.14)
x
2
2
−0.02 −1.45 0.05 −0.05 −0.14
(0.36) (1.40) (1.19) (0.86) (0.40)
y −1.33 −14.14 0.87
∗
0.59 0.39
(1.35) (1.32) (3.30) (0.68) (0.13)
y
2
0.02 −0.24 0.02 −0.86 −0.10
(0.45) (0.26) (0.54) (1.81) (0.48)
z −0.44 −24.74
∗
−0.75
∗
−0.51 −1.23
(0.37) (2.36) (2.61) (0.50) (0.46)
z
2
0.00 0.34 −0.11 0.00 0.09
(0.05) (0.38) (0.70) (0.09) (0.61)
x
1
x
2
−0.49
∗
−0.84
∗
35.98 −0.02 −3.06
∗
−0.55
∗
(8.40) (2.75) (1.87) (0.28) (58.43) (4.10)
x
1
y 0.18 0.14 −6.96 0.06 0.05 0.17
(1.51) (0.44) (0.29) (0.55) (0.47) (0.31)
x
2
y 0.05 −2.69
∗
−30.63 −0.17 −0.01 −0.03
(0.51) (7.42) (1.40) (1.86) (0.09) (0.10)
x
1
z 0.17 0.42 43.11
∗
0.03 −0.00 0.23
(1.26) (1.06) (2.10) (0.28) (0.02) (0.48)
x
2
z −0.11 −3.01
∗
−54.96
∗
−0.12 0.12 −0.14
(0.81) (9.82) (2.28) (1.20) (1.00) (0.39)
yz 0.03 −3.10
∗
13.49 −0.11 0.07 0.02
(0.17) (9.01) (0.49) (1.30) (0.54) (0.07)
x
1
yz −0.02 13.06 0.00 0.01 −0.03
(0.88) (0.55) (0.18) (0.34) (0.37)
x
2
yz −0.99
∗
−95.74
∗
−0.01 −15.65
∗
−0.97
∗
(44.01) (3.49) (0.27) (877.06) (19.76)
Adj. P
2
(%) 99.96 94.26 83.54 81.24 99.99 99.93
Notes. Dependent variable is p
t
. All variables deﬁned in the text. All
are continuous variables apart from the variables in the last 8 rows
of column (3), which are dummy variable replacements. Method
of estimation in all columns: OLS. Number of observations in all
columns is 100 apart from (6), where it is 22. The columns are
explained in the text. Absolute tstatistics are in parentheses.
∗
Indicates signiﬁcance at 5%.
Panel A. At one level, this is not too surprising: by omit
ting important explanatory variables a regression cannot
be expected to give accurate results. What these results
therefore illustrate is the wellknown consequences of
misspeciﬁcation in the context of FAM methods.
Burton et al. (2002) proposed a third, theorydriven,
approach to measuring FAM. They deﬁne a dummy
variable SIT MISF whose value equals one for an obser
vation for which any of the contingency variables for
that observation are in a state of (theoretically deter
mined) misﬁt. Otherwise its value equals zero for that
observation. Burton et al. also deﬁne additional dummy
variables capturing misﬁt, which is not attributable to
Parker and van Witteloostuijn: General Framework for Estimating Multidimensional Contingency Fit
548 Organization Science 21(2), pp. 540–553, ©2010 INFORMS
Table 4 IC Fit Statistics
IC statistic LM LR W 5% crit. val.
A. Column (1) of Table 3
Withinx ﬁt 45.94
∗
61.51
∗
81.98
∗
3.84
Betweenxy ﬁt 4.33 4.43 4.53 5.99
Betweenxz 2.38 2.40 2.43 5.99
Betweenyz ﬁt 0.04 0.04 0.04 3.84
Multiple ﬁt 96.66
∗
340
∗
2,897
∗
5.99
B. Column (2) of Table 3
Withinx ﬁt 8.37
∗
8.74
∗
9.13
∗
3.84
Betweenxy ﬁt 44.67
∗
59.19
∗
80.75
∗
5.99
Betweenxz 59.08
∗
89.36
∗
144.35
∗
5.99
Betweenyz ﬁt 49.46
∗
68.24
∗
97.87
∗
3.84
Multiple ﬁt — — — —
C. Column (3) of Table 3
Withinx ﬁt 4.05
∗
4.14
∗
4.22
∗
3.84
Betweenxy ﬁt 2.55 2.58 2.61 5.99
Betweenxz ﬁt 8.94
∗
9.36
∗
9.81
∗
5.99
Betweenyz ﬁt 0.28 0.29 0.29 3.84
Multiple ﬁt 12.78
∗
13.67
∗
14.65
∗
5.99
D. Column (4) of Table 3
Withinx ﬁt 0.10 0.10 0.10 3.84
Betweenxy ﬁt 4.31 4.41 4.51 5.99
Betweenxz ﬁt 2.67 2.71 2.75 5.99
Betweenyz ﬁt 1.99 2.01 2.03 3.84
Multiple ﬁt 0.10 0.10 0.10 5.99
E. Column (5) of Table 3
Withinx ﬁt 97.63
∗
374.08
∗
4.113.25
∗
3.84
Betweenxy ﬁt 0.26 0.26 0.27 5.99
Betweenxz 2.15 2.17 2.19 5.99
Betweenyz ﬁt 0.35 0.35 0.35 3.84
Multiple ﬁt 99.99
∗
932.91
∗
1.1×10
6∗
5.99
F. Column (6) of Table 3
Withinx ﬁt 16.95
∗
32.37
∗
73.82
∗
3.84
Betweenxy ﬁt 0.54 0.54 0.55 5.99
Betweenxz 1.12 1.15 1.18 5.99
Betweenyz ﬁt 0.02 0.02 0.02 3.84
Multiple ﬁt 21.81
∗
104.17
∗
2.483.32
∗
5.99
each contingency variable in turn. So in the present con
text, a dummy variable NO X
1
takes a value of one for an
observation for which SIT MISF takes the value one but
there is no misﬁt in x
1
for that observation (else it takes
the value zero). Dummy variables NO X
2
, NO Y, and
NO Z can be deﬁned analogously. Burton et al. predict
that in a regression of ¡ on the complete set of dummy
variables (SIT MISF, NO X
1
, NO X
2
, NO Y, and NO Z),
the variable SIT MISF should have a signiﬁcant negative
effect, reﬂecting performancedamaging misﬁt, whereas
either the other dummy variables are zero or they are
positive if there are any beneﬁts from the absence of
misﬁt in a single dimension.
We implemented the Burton et al. (2002) method to
be as generous to it as possible by assuming that the
researcher knows the true form of the DGP (7). Hence
any values of x
1
x
2
or x
2
xz that are greater than their
respective means have the greatest negative effects on
performance and so are associated with misﬁt. After
Table 5 Regression Results for Alternative Fit Approaches
Variable (1) (2) (3) (4) (5) (6)
Constant −4.44 −21.47
∗
−131.76
∗
−1.12 −7.25
∗
−51.14
∗
(0.19) (17.08) (5.60) (1.03) (2.59) (2.39)
D −2.63
∗
−0.41
∗
−0.33
∗
0.19
(4.49) (19.67) (45.22) (0.56)
SIT MISF 5.09
(1.33)
NO X
1
6.50
(1.75)
NO X
2
−7.61
(1.84)
NO Y −10.41
∗
(2.15)
NO Z 11.78
∗
(2.88)
ˆ u −4.04
(1.01)
ˆ u −3.67
(0.96)
ˆ u ˆ c 0.02
(1.28)
Adj. P
2
(%) 31.58 18.93 0.00 81.26 95.83 −0.03
Note. Variables are deﬁned in the text. See the notes to Table 3 for
entries.
calculating the sample means of x
1
x
2
and x
2
xz in our
simulation, we coded values of SIT MISF as one for
observations where either of these product variables
have aboveaverage values—and zero if neither do. Also
following those authors, we coded NO X
1
as one for
observations where SIT MISF = 1 but where x
1
takes
values less than or equal to its sample mean (imply
ing the variable is causing least misﬁt)—and as zero if
these conditions do not hold. The other dummy variables
proposed by Burton et al. were deﬁned analogously
(e.g., we coded NO X
2
as equal to one for observations
where SIT MISF =1 but where x
2
takes values less than
or equal to its sample mean). This is generous to Bur
ton et al. because it comes closest to mimicking the true
DGP, recognizing that theory alone might not always
correctly identify instances of ﬁt.
The results of implementing this approach are pre
sented in column 2 of Table 5. Contrary to predic
tions, SIT MISF is positive and insigniﬁcant, whereas the
effects of the other dummy variables are mixed. Obvi
ously, if the theory underlying the dummy variable cod
ing is incorrectly speciﬁed, the Burton et al. approach
is liable to yield even more misleading results. After
all, even expert opinions about ideal types can differ
(Doty et al. 1993), implying that some “expert” opinions
are sometimes wrong.
An anonymous referee wondered whether the GI
model might outperform Burton et al. (2002) if dummy
variables were used in place of all interactions in (1).
This is a valuable exercise because it identiﬁes the role
Parker and van Witteloostuijn: General Framework for Estimating Multidimensional Contingency Fit
Organization Science 21(2), pp. 540–553, ©2010 INFORMS 549
played by dummy variable codings per se as distinct from
the speciﬁc use of them by Burton et al. We explored
this possibility by replacing all interactions in (1) with
dummy variables. For example, a dummy variable for
x
1
x
2
took the value one for values of this variable that
exceeded its sample mean and zero for values below its
sample mean. Dummy variables were deﬁned similarly
for all of the dual and multiple betweengroup ﬁt deter
minants of performance. These dummies replaced the last
eight continuous variables of (1). The parameter esti
mates appear in column 3 of Table 3, and the IC statistics
appear in Panel C of Table 4. Compared with column 1
of Table 3 and Panel A of Table 4, these results show that
the dummy model performs adequately but not as well
as the pure TL model. The parameter estimate on x
1
x
2
in
column 3 of Table 3 takes the wrong sign and is not quite
signiﬁcant at 5%, although the IC statistics in Panel C of
Table 4 correctly identify both types of ﬁt as signiﬁcant
in Panel C. Unfortunately, some spurious betweenxz ﬁt
also appears to be signiﬁcant. Essentially, replacing con
tinuous variables with dummy variables discards valuable
information, which is why the results based on dummy
interactions identify the DGP inaccurately. Nevertheless,
by correctly identifying at least some aspects of ﬁt, the
results appear to be superior to those of the Burton et al.
approach discussed above.
Finally, we analyze one more alternative approach to
ﬁt, suggested by Zajac et al. (2000). This is the “Fit as
Mediation” twostep approach, which has the following
structure:
c =1 (v) +u. (10)
¡ =o
0
+o
1
ˆ u +o
2
ˆ u +o
3
ˆ uˆ c +e. (11)
The ﬁrst equation (10) speciﬁes some auxiliary vari
able c as some function 1 (·) of the vector of covari
ates v; the u are random regression errors. Predicted
values of c are given by ˆ c =
1 (v) and residuals are given
by ˆ u =c − ˆ c. In (11) these predicted values and residuals
are taken to inﬂuence performance; misﬁt is detected by
a negative coefﬁcient on o
1
.The rational of Zajac et al.
is that ﬁrms whose c values diverge from those of the
predicted conditional mean given by the ﬁrst terms on
the RHS of (10) will likely be in misﬁt and end up with
lower performance.
To be as generous as possible to the Zajac et al.
method, it was implemented by (i) assuming that the true
structure of 1 (·) is known: c =8
0
+8
1
x
1
x
2
+8
2
x
2
xz+u,
and (ii) deﬁning c as a genuine mediating variable:
c = 0.5 ∗ ¡ + w, where w was deﬁned as a N(0. 3)
random noise as above. Column 3 of Table 5 presents
the results. As is readily seen, this approach does indeed
ﬁnd a negative coefﬁcient on ˆ u, but neither it nor any of
the other coefﬁcients are statistically signiﬁcant. Hence
the Zajac et al. method is silent about the existence and
structure of ﬁt or misﬁt, even though we know from the
true DGP that ﬁt is present. The Zajac et al. method
performs poorly because the residuals do not exploit the
underlying structure inherent in the ﬁt relationship and
so cannot adequately represent the ﬁt that is present in
the data.
In summary, the results in this section show that
although one alternative method (Vorhies and Morgan
2003) can actually detect FAM ﬁt when it is present,
none of the alternative ﬁt methods analyzed here uncover
either the identity or full structure of ﬁt for the FAM
datageneration process given by (7). Hence the GI ﬁt
approach would seem to be a valuable addition to the
set of ﬁt approaches for at least some types of DGP.
Of course, it remains to be seen how successful the
GI approach is at mimicking alternative DGPs—i.e.,
whether the GI approach also satisﬁes the ﬁrst robust
ness property above. This question is examined next.
Comparisons Based on a FAD DGP
Suppose now that the performance data are generated
by (8). With this DGP, we might logically expect the
explicit FAD approach described in the previous subsec
tion to perform well, whereas the GI approach does not.
To explore this possibility, we compare the GI approach
to the one used by Vorhies and Morgan (2003). For
illustrative purposes, four integers were randomly drawn
from the uniform distribution with support 0. 10]. This
gave v
∗
=(4. 8. 9. 1). The FAD DGP involves substitut
ing this v
∗
into the RHS of (8) and adding randomly
generated normal numbers generated from N(0. 3) to
compute values of ¡. The Vorhies and Morgan (2003)
method described above was then applied. That is, we
calculated the average v for the 10 cases with the largest
values of ¡, denoted by ˆ v
∗
, and then computed values of
D=(v − ˆ v
∗
)
(v − ˆ v
∗
) for the remaining 90 observations
before running the regression ¡ =o
0
+o
1
D. The Vorhies
and Morgan method stipulates the regression estimate
of o
1
to be negative and statistically signiﬁcant. This is
indeed what is found in column 4 of Table 5.
We then applied the GI FAM approach to the same
DGP (8). As noted in the previous section, expand
ing the quadratic form in (8) yields an equation, (2),
that is a special case of (1), namely where only the
“individual effects” are present, with zero coefﬁcients
for all of the interaction effects. Column 4 of Table 3
and Panel D of Table 4 shows that the GI approach
is able to identify this case by correctly ﬁnding sig
niﬁcant individual effects and insigniﬁcant interaction
effects. Interestingly, these ﬁndings clearly identify the
nature of the ﬁt, namely FAD (recall that, in contrast,
the Vorhies and Morgan method is unable to do this
when the DGP is FAM). Furthermore, the adjusted R
2
is almost identical to that of the Vorhies and Morgan
estimates in column 4 of Table 5 (the slight reduction
is attributable to the redundant interaction variables in
this case). This suggests a useful, important, and novel
Parker and van Witteloostuijn: General Framework for Estimating Multidimensional Contingency Fit
550 Organization Science 21(2), pp. 540–553, ©2010 INFORMS
possibility: In practice, when the true DGP is rarely if
ever known, the GI approach can nevertheless identify
the type of ﬁt underlying the data (e.g., FAM in col
umn 1 and FAD in column 3). In an empirical sense,
therefore, FAD is “nested” in the GI approach. This
implies a response to Fiss’s (2007, p. 1183) critique of
the FAD approach: “[A] deviation score approach allows
the researcher only limited peeks into the black box
of conﬁgurations. It often remains unclear which aspect
of the misﬁt actually affects the outcome in question.”
In this respect, the GI method appears to outperform
FADbased alternatives.
Mismeasurement, Small Sample Sizes,
and Collinearity
A second desirable property of ﬁt measures is robust
ness to mismeasurement of variables. Below, we focus
on comparing the GI approach with the explicit FAD
approach used in Vorhies and Morgan (2003). To explore
this issue for both FAM and FAD ﬁt approaches, the true
data continue to be associated with v, whereas the error
prone actual values available to the researcher are taken
to be 2.5×v. If ﬁt approaches are robust to mismeasure
ment of variables, their indications of ﬁt should be unaf
fected. This prediction is tested using DGP (7) for the GI
approach and using DGP (8) for the Vorhies and Morgan
approach. The results appear in column 5 of Table 3,
Panel E of Table 4 for the GI approach, and column 5
of Table 5 for the Vorhies and Morgan approach. The
results in these tables show that each method still cor
rectly identiﬁes ﬁt so both methods appear to be robust
to this type of mismeasurement.
The third desirable property of ﬁt measures is robust
ness to a small sample size. To explore this issue, the
number of observations of v and v
∗
is reduced to 22.
This decreases the degrees of freedom in the GI regres
sion to a mere ﬁve. Yet as column 6 of Table 3 and
Panel F of Table 4 reveals, the inference of the GI
approach is remarkably robust to the very small number
of degrees of freedom. In contrast, column 6 of Table 5
shows that the coefﬁcient of the distance measure carries
the incorrect sign and is statistically insigniﬁcant, imply
ing no sources of misﬁt. This is, of course, the opposite
of the true state of affairs.
So far, then, our ﬁndings suggest that the GI method
is probably the most robust and informative of the ﬁt
approaches considered here. However, we have only
applied the GI method using a small number of contin
gencies. At issue is the fact that the GI method prolif
erates parameters when there are numerous explanatory
variables. Table 6 illustrates the problems that this can
cause. The ﬁrst row of Table 6 corresponds to the empir
ical analysis performed so far in this article, where
n
I
=2 and n
E
=n
S
=1. This model generates 17 regres
sors in (1), which according to our simulation analysis
Table 6 Numbers of Contingencies and Covariates in
GI Models
n

n
E
n
S
No. of regressors Min. sample size
2 1 1 17 18
2 2 2 36 39
3 3 3 82 90
4 4 4 155 163
5 5 5 261 n.a.
6 6 6 406 n.a.
Notes. Number of regressors is
1+2(n

+n
E
+n
S
) +
1
2
¡=. E. S
n
¡
(n
¡
−1) +n

n
E
+n

n
S
+n
E
n
S
+n

n
E
n
S
.
This is the number of terms in (1) in the text. Min. sample size is the
minimum number of observations needed to apply the GI method in
practice and obtain accurate IC statistics. n.a. = not available, i.e.,
design matrix H
t
H
t
is too large to invert to compute OLS formulae
ˆ
o =(H
t
H
t
)
−1
H
t
p
t
.
can be estimated using a minimum of 18 observa
tions. Lower rows of Table 6 correspond to ever larger
models. With 163 observations, for instance, the GI
method can handle 12 contingency variables and the
associated 155 regressors.
9
Evidently, the number of
explanatory variables grows rapidly as the number of
contingency variables increases. In contrast to the alter
native approaches considered here, the minimum sample
size needed to operationalize the GI approach rapidly
becomes quite large. This can in and of itself pose an
important practical limitation if data are scarce. Clearly,
although it is possible to create a large sample size in
simulation exercises, it is often difﬁcult or impossible
when using realworld data.
Another problem with the GI method is that when
there are numerous contingencies, parameter estimation
can become difﬁcult or impossible. For example, some
econometric programs place restrictions on the maxi
mum number of covariates in the design matrix. Fur
thermore, it can be difﬁcult to interpret coefﬁcients in
these cases, and collinearity can also become a prob
lem. Although in general collinearity does not affect E
statistics (Gujarati 1995) on which the IC statistics are
based—implying a broad degree of robustness in this
sense—some software programs can break down when
collinearity is very pronounced. And even though step
wise regression methods might be used to address these
problems when degrees of freedom are scarce, stepwise
regression is not without its limitations either. For exam
ple, the type of stepwise algorithm used (e.g., forward
selection, backward elimination, or some combination),
the order of parameter entry (or deletion), and the num
ber of candidate parameters can all affect the selected
model (e.g., Derksen and Keselman 1992). These prob
lems can be particularly acute when the regressors are
correlated.
Parker and van Witteloostuijn: General Framework for Estimating Multidimensional Contingency Fit
Organization Science 21(2), pp. 540–553, ©2010 INFORMS 551
Costs and Beneﬁts
The GI approach promises several important beneﬁts
compared with existing methods. These include robust
ness to data generated by different DGPs, to mis
speciﬁcation of ideal ﬁt proﬁles (because it makes no
explicit assumptions or inferences about such proﬁles),
to mismeasurement of variables, and to small sample
sizes. The GI approach also identiﬁes which dimen
sions of ﬁrm performance (if any) are associated with
ﬁt, which (if any) are associated with misﬁt, and even
which DGP likely underlies the observed data. The lat
ter is a particularly valuable property because it helps
elucidate the underlying structure of ﬁt, aiding inter
pretation and potentially helping to inform appropriate
strategies. However, the GI approach is less wellsuited
to handling very large numbers of contingencies. These
costs and beneﬁts need to be carefully weighed in future
empirical analyses of ﬁt. Our own view is that for the
reasons enumerated above, the GI approach should be
used whenever feasible, for instance when the number
of contingencies make conventional estimation possible
(even when degrees of freedom are limited). But in mod
els where there are very large numbers of contingencies,
alternative methods such as Vorhies and Morgan (2003)
should be used—albeit at the cost of not being able to
determine the true nature of the DGP underlying the
observed ﬁt.
More speciﬁcally, our Monte Carlo simulations re
vealed that the GI method is able to deal with relatively
small sample sizes. Clearly, though, there is inevitably a
sample size threshold below which estimation ceases to
be feasible, depending upon the number of covariates.
Then either the number of covariates has to be reduced
or another method must be applied. In the ﬁrst case, the
researcher may decide, on the basis of theory, to restrict
the number of control variables, main effects (linear
and/or nonlinear), and product terms to be included in
the GI speciﬁcation. In the second case, if the sample
size is still too small relative to the number of the must
beincluded covariates, another method must be pre
ferred, such as that of Vorhies and Morgan (2003), Fiss’s
settheoretic approach, nonparametric tests, or case stud
ies. If the degrees of freedom condition is satisﬁed, how
ever, the GI method can be ﬂexibly applied within both
the deductive and the inductive ﬁt tradition. This we
believe is one of our method’s key beneﬁts.
Here we would like to emphasize an aspect of our
approach that we think is essential to further progress in
contingency research. That is, we believe that to date too
little attention has been paid to limitations of ﬁt mea
sures that imply speciﬁc assumptions as to the nature
of the underlying ﬁtgenerating process. Contingency
researchers currently do not know the implications of
assuming a particular theoretical conception of ﬁt when
in fact the data are generated by a totally different pro
cess. Our paper sheds light on this issue and proposes
a method that avoids the problems of imposing an inap
propriate theoretical structure on the data. We believe
the GI approach is especially useful when researchers
have little idea about the underlying nature of the ﬁt
generating process. In this case, it can help to reveal the
nature of the underlying process as well as the degree
of ﬁt.
A further advantage of our approach rests in the way
that the GI method deals with ideal types. Explicit FAD
based approaches in the contingency literature need ideal
types of conﬁgurations of variables to calculate dis
tance terms or to identify (mis)ﬁts. This implies either
that a theory must be in place to specify such ideal
types ex ante or that ﬁrststage empirical analyses are
required ex post as input in secondstage estimations.
Both approaches imply very strong assumptions about
the researcher’s a priori theoretical knowledge or the
quality of the post hoc ﬁrststage empirical analyses.
10
Our GI approach avoids such strong assumptions by
implicitly inducing ideal types in a oneshot estimation
procedure. Seen this way, the GI speciﬁcation implies
an inductive approach to distil ideal types from the data.
This is not to say that the GI approach cannot be com
bined with deduction––it can. After all, deduction guides
the selection of potential contingency variables and the
formulation of ﬁt hypotheses, which can subsequently
be tested within the nested context of a comprehensive
GI performance model. In the empirical analysis, such
deductive reasoning does not impose any constraints on
the estimation procedure.
Appraisal
This paper developed a general approach to measuring ﬁt
in the parametric performancecriterion tradition (Venka
traman 1989). In the large contingency literature, con
sensus on the way to measure and estimate ﬁt is absent,
implying that results across the literature are difﬁcult to
compare. Two widely used but different ﬁt approaches
are referred to as ﬁt as moderation (FAM) and ﬁt as devi
ation (FAD). The FAM approach is based on the assump
tion that contingency effects are reﬂected in interaction
terms, whereas the FAD approach argues that this can
only be achieved by distance terms. Our general interac
tion (GI) approach is agnostic in this respect because the
GI speciﬁcation of ﬁt integrates both the FAM and sym
metric FAD notions as nested cases. Using simulations,
we show that the GI approach indeed correctly identiﬁes
all FAM and FAD instances of ﬁt, even if the underlying
datageneration process is of a FAD nature.
More generally, provided that the number of con
tingencies is not too great, our GI speciﬁcation can
be superior to a series of alternative ways to mea
sure and estimate ﬁt—i.e., ﬁt as distance from an ideal
type (e.g., Vorhies and Morgan 2003), ﬁt as a dummy
(e.g., Burton et al. 2002), and ﬁt as mediation (e.g., Zajac
et al. 2000). That is, the GI approach does capture the
Parker and van Witteloostuijn: General Framework for Estimating Multidimensional Contingency Fit
552 Organization Science 21(2), pp. 540–553, ©2010 INFORMS
“true” instances of ﬁt, which the other approaches fail
to do, whether produced by an underlying FAM or FAD
datageneration process. This is the ﬁrst, and most impor
tant, property of the GI approach. In addition, the GI
approach has four additional desirable properties: (1) it
moves far beyond the dominant bivariate approach by
including a series of bivariate and higherorder interac
tion terms; (2) it is associated with test statistics (IC, or
incremental contribution statistics) that are broadly insen
sitive to multicollinearity; (3) it is more robust to mis
measurement of variables; and (4) it can deal with small
sample sizes. However, the GI approach comes at the
cost of proliferating parameters in models with numerous
contingencies. The issue of small sample sizes deserves
further work in future research.
Future research might also try to extend the compar
ative analysis of different ﬁt methods adopted here by
paying greater attention to the alternative approaches of
complementarity and supermodularity. Recently, using
the complementarity framework of Milgrom and Roberts
(1995), an interesting series of empirical studies has
emerged that tries to empirically estimate complemen
tarities (see, e.g., Cassiman and Veugelers 2006). This
suggests that the application of the empirical supermod
ularity approach in the broader contingency tradition
deserves further attention (Porter and Siggelkow 2008).
This also holds true for the temporal ﬁt approach of
PerezNordtvedt et al. (2008). Basically, they argue that
we need to test for the effect of temporal (mis)ﬁt on ﬁrm
performance. To do so, longitudinal research is needed.
In our paper, we do not refer to a time dimension at all.
Our method, in principle, can deal with longitudinal data
and “dynamic” ﬁt measures. A dynamic measure would
be, e.g., that the change in strategy from t to t +1 ﬁts
well (or not, of course) with the change in the environ
ment from t to t +1. It remains to be seen whether there
exists an even more general ﬁt approach that can encom
pass these frameworks as well as those discussed in this
paper. We hope to explore this issue in future work.
We believe that the various measures proposed here,
together with the full set of estimated coefﬁcients in the
underlying performance model, provide a rich source of
information from which a full and rounded picture of
ﬁt and ﬁrm performance can be obtained. Our general
framework is ﬂexible in the sense that multivariate inter
actions can be easily introduced, as can series of bivari
ate product terms—thus introducing a systemtype of ﬁt
notion. Moreover, we believe that the IC statistic is supe
rior to the ones used in the extant literature, for the rea
sons adduced above. Additionally, the multiinteractions
across groups jointly indicate conﬁgurations of complex
bundles of complementarities that reﬂect ideal types of
performancemaximizing sets of organizational features
and environmental contingencies. In doing so, we offer a
general framework of measuring ﬁt that encompasses the
ﬁtasmoderation or interaction, ﬁtasdeviation or con
gruence, and the ﬁtasbundle or system perspectives.
We hope that the simplicity and power of the approach
we propose will be of considerable practical use to future
organizational scientists.
Acknowledgments
The authors thank the senior editor and three anonymous refer
ees for helpful comments on earlier drafts; the usual disclaimer
applies.
Endnotes
1
In advance, it should be noted that some of the above exam
ples already integrate different approaches to ﬁt. Particularly,
Zajac et al. (2000) add interaction terms to their residual
approach, and Burton et al. (2002, 2003) estimate the impact
of both individual and aggregated (mis)ﬁt dummies. However,
neither these nor any other approach in the literature is as
comprehensive as ours. Additionally, systemtype of ﬁt stud
ies often employ correlation and variance analyses to reveal
patterns of associations (e.g., Doty et al. 1993). However, in
the current paper, we focus on parametric regression methods.
2
Our approach can easily be generalized to more than three
groups of variables. For instance, the Igroup could be split
into two sets of variables, one relating to “hard” internal issues
of organization structure and another one capturing “soft”
internal aspects of organizational culture. For our purposes,
though, there is no need to complicate the calculus further.
Note that, moreover, our three sets of variables cover the main
thrust of the contingencyrelated literature.
3
See Christensen et al. (1973, 1975) for a proof of this prop
erty of the TL speciﬁcation in the context of production and
utility functions.
4
Equation (1) could also be derived using the “Expansion
Method” popularized by Emilio Casetti in the 1970s (for a dis
cussion, see, e.g., Casetti 1992).
5
Where m = o
0
+ o
1
x
∗2
+ o
2
x
∗2
+ o
3
z
∗2
, o
I
= −2o
1
x
∗
,
8
I
=o
1
, o
E
=−2o
2
x
∗
, 8
E
=o
2
, o
S
=−2o
3
z
∗
, and 8
S
=o
3
.
This speciﬁcation remains valid and estimable also when x
∗
,
x
∗
, and z
∗
are somehow “known” or estimated externally
because o
0
, o
1
, o
2
, and o
3
remain unknown parameters. Note
that the GI model does not nest all possible FAD speciﬁca
tions. For instance, it does not nest asymmetric speciﬁcations
that penalize deviations above an optimal level differently from
deviations below an optimal level. We leave this issue for future
research.
6
Positive coefﬁcients on all interaction terms are consistent
with different notions of ﬁt known as “complementarity” and
“supermodularity”: see, e.g., Athey and Stern (1998), Mohnen
and Röller (2005), Cassiman and Veugelers (2006), and Porter
and Siggelkow (2008).
7
In this case and all others considered below, all three IC statis
tics yield identical conclusions. Also, all of the aggregate ﬁt
statistics are highly signiﬁcant, so issues relating to IC statistic
type and aggregation are not discussed any further below.
8
This approach might be criticized as rather limited, by assum
ing that only a unique v
∗
maximizes performance (“uniﬁ
nality”). See for example Fiss (2007), who proposes a more
sophisticated settheoretic approach that can identify multiple
v
∗
s that can all be associated with high performance (“equi
ﬁnality”). Our approach can deal with equiﬁnality, too. For
Parker and van Witteloostuijn: General Framework for Estimating Multidimensional Contingency Fit
Organization Science 21(2), pp. 540–553, ©2010 INFORMS 553
example, let (o. l. c. J) be four dummy variables. Suppose
ﬁrm 1 has o = l = 1 and c = J = 0, whereas ﬁrm 2 has the
opposite: o = l = 0 and c = J = 1. Then, letting ¡ denote
performance, the FAM regression model ¡ =ol +cJ exhibits
equiﬁnality for the two ﬁrms. If cases of o =l =c =J =1 are
technically infeasible, then only equiﬁnality is observed.
9
Of course, this example serves an illustrative purpose only:
we certainly do not suggest that researchers should increase the
number of regressors up to the maximum possible limit.
10
As a prominent researcher on ﬁt recently put it, “[I]deal
types thus largely depend on just how the sample is composed,
rather than on substantive theory about what an ideal conﬁgura
tion means and what makes it ideal. Furthermore, the obtained
results may be quite sensitive to even minor errors in estimat
ing the ‘ideal’ conﬁgurations, and the reliability of deviation
scores will often be very low because it is the product of the
reliabilities of the original variables” (Fiss 2007, p. 1183).
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