Management Research
Methods: Insights from
Critical Realism
Eric W. Tsang
School of Management
University of Texas at Dallas
Why does philosophical
perspective matter?


Every researcher subscribes to a certain
philosophical perspective, whether explicitly
or implicitly.
That perspective affects the formulation of
research questions, method of data collection
and analysis, as well as development of
theory.
Critical realism




A mind-independent reality, which has its
own inherent order, exists.
Reality consists of structures and
mechanisms.
Structures refer to sets of internally related
objects.
E.g., the employer-employee relationship
presupposes the existence of employment
contract, wage, hiring, firing, and so on.
Critical realism



Mechanisms refer to ways of acting.
The combined effects of structures and
mechanisms may generate events that in turn
may be observed.
The absence of an observable event does
not necessarily mean that the underlying
mechanisms do not exist.
Critical realism

Three domains of reality:



Empirical: events experienced through direct or
indirect observation.
Actual: events, whether or not they are observed.
Real: generative mechanisms capable of
producing patterns of events.
Real Domain
Actual Domain
Mechanisms

Events


Experiences


Empirical Domain

Critical realism
Events
E1
E2
E3
E4
E5
E6
E7
E8 Ei
Contingent
conditions
Mechanisms
Structures
M1
M2
S1
M3
M4
S2
M5
M6 Mj
S3
S4 Sk
Critical realism


E.g., if an observed choice of governance
structure contradicts the prediction of
transaction cost economics, it is not
necessarily an incident of falsification.
It may indicate the presence of countervailing
mechanisms, such as tax incentives or
government restrictions.
Critical realism


In social studies, it is rarely possible to
achieve conditions of closure where an event
of type a is invariably accompanied by an
event of type b.
The impossibility of constructing closed
systems in the social sciences implies that
the disciplines are primarily explanatory or
interpretive rather than predictive.
Critical realism


A causal explanation aims to identify objects,
structures and the mechanisms that connect
them, causing events to occur.
The goal of scientific inquiry is to provide
knowledge about the real structures and
mechanisms underlying the phenomenon in
question.
Critical realism vs. positivism


Positivists reject the critical realist view that
theories may contain theoretical terms that
(1) are in principle unobservable and (2)
cannot be defined through a set of
correspondence rules with observable terms.
Positivists adopt Hume’s view that causation
refers to the regular succession of events.
Some insights from critical realism
Need assumptions be realistic?
 Need empirical studies be replicated?
 Can case findings be generalized?

Need assumptions be realistic?


Friedman (1953) argued that it does not
matter whether the assumptions of an
economic theory are realistic as long as the
theory yields sufficiently accurate predictions.
Shugan (2007) echoed, “Criticizing
assumptions as unrealistic is absurd.” (p.
449)
Need assumptions be realistic?



A core assumption is often a key element of
the mechanism that underlies an explanation.
E.g., for transaction cost economics, the
assumption of opportunism plays a crucial
role in the mechanism that accounts for the
choice of hierarchy versus market.
An unrealistic core assumption will lead to an
unrealistic explanation and thus a defective
theory.
Need assumptions be realistic?



If possible, core assumptions should be
included in empirical tests.
Structural model
z = f(x, y)
(1a)
where x = g(u), and y = h(v)
(1b)
Reduced model
z = φ(u, v)
(2)
Need assumptions be realistic?


Equations 1b “explain” the intermediary
variables x and y, whereas Equation 2 does
not even contain them.
The reduced model can be derived from the
structural model but not the other way round
because the task of working out the structural
model from the reduced model is an inverse
problem with an indefinite number of
solutions.
Need assumptions be realistic?


A core assumption is often eliminated in the
process of converting a structural model into
its reduced form.
Most empirical studies of transaction cost
economics are based on the reduced model
format; thus the related core assumptions
and mechanisms are not subject to direct
testing.
Need assumptions be realistic?


Williamson claims that transaction cost
economics “is an empirical success story”
(1996: 55).
Ghoshal and Moran counter, “Even though
an impressive number of empirical studies
have found a positive relationship between
asset specificity and internalization …,
correlation does not demonstrate causation”
(1996: 40).
Need empirical studies be replicated?



In many natural sciences, the replication of
empirical findings is a common practice.
Replication research is seldom conducted,
not to mention being published by
management journal.
An issue that has to be addressed by
management researchers if they claim that
management is a science discipline.
Need empirical studies be replicated?
1. Accommodation and prediction
Accommodation: a researcher constructs a
theoretical explanation for the data collected
from his or her study.
Prediction: another researcher later
successfully replicates the results of the
original study
The replication provides the theoretical
explanation with a quantum leap in credibility.
Need empirical studies be replicated?

When Dmitri Mendeleev constructed a theory
of the periodic table to account for all the
sixty known elements, the scientific
community was only mildly impressed.
However, when he went on to use his theory
to predict the existence of two unknown
elements that were later independently
discovered, the Royal Society awarded him a
Davy Medal.
Need empirical studies be replicated?
2. Verification and falsification of theories
When many replications conducted in diverse
contexts are repeatedly successful, it is highly likely
that the theory concerned has hit upon some real
structure or mechanism in the social world.
When a theory repeatedly fails to be replicated, it is
more plausible to regard the original findings as the
result of chance factors or idiosyncrasies of the
context rather than the manifestation of real
structures or mechanisms.
Need empirical studies be replicated?


Since management studies are rarely
conducted under conditions of closure,
replicability does not mean conclusive
verification and failure to be replicable does
not mean conclusive falsification.
Continuous testing of theories through
replicated and innovative studies is needed
for theory development.
Can case findings be generalized?


Case studies are often criticized on the
grounds that their findings are not
generalizable to other settings because of the
small-N problem.
“If there is no generalizing beyond the data,
no theory. No theory, no insight. And if no
insight, why do research?” (Mintzberg, 2005:
361).
Can case findings be generalized?


There is some invariance in the social world,
i.e., some structures and mechanisms remain
stable across space and time.
If all events and their causes are unique,
there could neither be valid generalizations
nor theories. In fact, our lives would be
virtually impossible.
Can case findings be generalized?


Case study researchers collect detailed data
through various sources on events that occur
in an open-system context.
Though data are collected in the empirical
domain, case studies shed light on the
specific contingent conditions under which
the postulated mechanisms operate and
interact in the real domain.
Can case findings be generalized?


In this respect, case studies are superior to
quantitative studies, most of which are based
on the reduced model format.
Given the existence of invariance in the
social world, the extent of which can be
checked by replicated studies, case findings
are generalizable, though not in the statistical
sense.
Advice for doctoral students



When you have time, it is always good to
read Western philosophy, especially
philosophy of science or social science.
You’ll be amazed by the quality of arguments
presented in these writings. Try Bertrand
Russell’s (1912) The Problems of Philosophy
as a start.
At the very least, it will help you avoid glaring
mistakes of argument.
Management information systems

“The generalizability of sample points to a
sample estimate depends on whether certain
conditions required by statistical methods are
satisfied …” (p. 234)
Lee, A. S., & Baskerville, R. L. 2003. Generalizing
Generalizability in Information Systems Research.
Information Systems Research, 14(3): 221-243.
Marketing

“without models, every situation at every time
on every variable would be unpredictable” (p.
449).
Shugan, S. M. 2007. It’s the findings, stupid, not the
assumptions. Marketing Science. 26(4) 449-459.
Organization theory

“The essence is that no matter how hard we
might try, the characteristics of complexly
interactive and tightly coupled systems will
cause a major failure, eventually” (p. 216)
Perrow, C. 1994. The limits of safety: The
enhancement of a theory of accidents. Journal of
Contingencies and Crisis Management, 2(4): 212-220.