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st: Modeling simultaneity

From   "Pavlos C. Symeou" <>
Subject   st: Modeling simultaneity
Date   Mon, 04 Feb 2013 16:03:34 +0200

Dear Statalisters,

I was wondering whether any of you can help me with this.

I have three variables: Absorptive capacity, Diversification, and Performance. I am arguing that the first two are simultaneously determined and they influence the third one.

Explicitly, I am arguing that the ability of the firm to understand new knowledge (what is called Absorptive Capacity AC) influences the direction of the firm's market diversification (DIV). However, once the firm has diversified, it in turn influences the firm's ability to understand new knowledge (AC). I want to empirically account for this simultaneity when I try to examine the effect of AC and DIV on the performance of the firm.

I can use instrumental variables to model the simultaneity, but I don't know how to examine the final effects of AC and DIV on firm performance while controlling for simultaneity.

I look forward to receiving your comments.


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