Final Paper

Final Paper - Haubold 1 Max Haubold MNGT 364 4/27/11 Final...

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Haubold 1 Max Haubold MNGT 364 4/27/11 Final Paper Comparing the Economics “The Organization Man” by William H Whyte and “The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron” by Bethany McLean and Peter Elkind both examine corporate culture through economic, cultural, and political scopes. To do this, they consider the contemporary influences of their respective time frames, and how various factors influence corporate culture. In these analyses however, neither acknowledge the heteroscedasticity inherently skewing their assertions and conclusions. Each work of literature effectively constructs a multivariate regression culminating to the conclusion that the described scenario was the fault of their respective point of disagreement. For Whyte, this consists of the societal shift toward scientism and group collaboration. For McLean and Elkind, the focus of failure falls on the individuals and the way corporate culture during the 1990s and 2000s allowed such gluttony and misdirection. Yet I argue that the absolute terms given by each author and therefore the lack of acknowledgment of pertinent heteroscedastic errors, weaken their arguments and shift strong theses into the realm of conjecture and uncertainty. A background is necessary to understand this assertion. Consider a standard regression, in which data is collected for a series of various conditions and factors. We could have factors X, Y, and Z, all of which we use to figure out the multivariate influence on A. Note that each of X, Y, and Z will all have its own variance, and therefore a lower depth of analysis than simply a static value. The graph below shows heteroscedasticity. 1
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Haubold 2 4 What does this mean exactly? Well, heteroscedasticity occurs when the random variables have differing variances. So, if we were to assume that all data was collected from the same sample, it should be the case that we see homoscedasticity. If we see heteroscedasticity, this means that the error
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Haubold 3 term varies with each observation. Certainly a standard Order of Least Squares regression would not prove biased if heteroscedasticity presented itself, but the problem is that with this variation comes an underestimation of the variance of each factor. This sometimes makes insignificant factors seem significant- which is where this relates to our analysis of the books. Surely the authors propose good and solid evidence supporting their thesis, but without acknowledging and dealing with the heteroscedasticity within the variables, we cannot possibly know which factors are significant. 1
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Final Paper - Haubold 1 Max Haubold MNGT 364 4/27/11 Final...

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