Multilevel Modeling in Exploring Institutional Effects on Performance

Abstract

The article engages in exploring the differences between standard panel regression model and multilevel panel model while estimating growth models on a sample of European food manufacturing companies for period 2004–2013. The article provides an overview of both approaches, critically identifies their strengths and weaknesses and concludes by recommendation on specifics of usage of each of those. Results of models suggest positive impact of political and legal framework and openness of economy and negative impact of government expenditures and economic conditions on firm performance. Comparison of approaches shows that similar results are obtained, though with relative higher significance of multilevel model’s coefficient. Theoretical background of Growth Theory and statistical methods suggest preference of multilevel model with a constrain of data availability.

Institutions and Firms’ Performance in Transition Countries: The Case of Selected Cesee Countries

“…In Olbrecht et al (2016), the authors also use a multilevel approach and the WGI database, but, in contrast to Olbrecht et al (2016), our paper exploits the chosen dimensions of the WGI index separately, and by using this approach it is possible to gain more precise insight into the influence of these institutional conditions, because one dimension can have a positive influence (control of corruption), while another can have a negative (regulatory quality) or no influence (rule of law). In the mentioned paper, the authors in their panel model found the WGI variable insignificant, and in the multilevel model, they found it positively significant.…”

“…the dimensions of regulatory quality, rule of law and control of corruption of the Worldwide Governance Indicators) and economic factors (e.g. GDP, and/or rate of unemployment (Olbrecht 2016(Olbrecht , p. 2088…”

“…In their analysis, Goedhuys and Srholec (2015) focus on the technological and educational infrastructure and found that these factors have an influence on economic performance. By analysing the impact of institutions on firm performance in EU countries, Olbrecht (2016) found a positive effect of the political and legal framework and openness of the economy on firm performance and a negative impact of government expenditures and macroeconomic indicators. There are two types of studies which can be considered as studies belonging to this group of literature: the first type is related to transition countries where focus is placed on recognising differences among the countries (e.g.…”