Feature Topic: Construct Measurement in Strategic Management

The Use of Archival Proxies

in Strategic Management
Studies: Castles Made
of Sand?

Organizational Research Methods

16(1) 32-42
The Author(s) 2012
Reprints and permission:
sagepub.com/journalsPermissions.nav
DOI: 10.1177/1094428112459911
orm.sagepub.com

David J. Ketchen, Jr.1, R. Duane Ireland2,

and LaKami T. Baker1

Abstract
Archival proxies have long played a central role within strategic management research, but the
degree to which archival proxies are construct valid measures of theoretical constructs remains a
source of concern. In some cases, there does not appear to be a close association between an
archival proxy and the construct that the proxy is meant to capture. In this brief commentary, we
discuss the use of three prominent archival proxies (research and development intensity, patent
counts, and patent citations) within recent articles in three leading journals. Each of these measures
has been used to represent a wide variety of constructs, which creates challenges when interpreting
findings. We then offer three suggestions for improving the use of archival proxies. Implementation
of these suggestions would enhance knowledge development within the strategic management field.
Keywords
construct validation procedures, content validity, measurement design, research design, strategic
management

And so castles made of sand fall in the sea, eventually.

Jimi Hendrix, Castles Made of Sand
An archival proxy is a quantitative measure that is used to represent a theoretical construct that is
relevant to the design and completion of a research study. In most cases, a measure that is used
as an archival proxy was collected for some other purpose and then is discovered to be a potentially
useful research tool. In many countries, for example, publicly held companies are required by
governments to gather and report a variety of financial measures such as net profits and return on
1
2

Department of Management, College of Business, Auburn University, Auburn, AL, USA

Department of Management, Mays Business School, Texas A&M University, College Station, TX, USA

Corresponding Author:
David J. Ketchen, Jr., Department of Management, College of Business, Auburn University, Auburn, AL 36849-5241, USA.
Email: ketchda@auburn.edu

Ketchen et al.

33

assets. These financial measures and others like them have been used by countless strategic
management researchers to represent the construct of firm performance.
Across the past several decades, archival proxies have played a significant role in the
development of the strategic management field. Understanding why this is so is easy given that
most strategic management studies adopt the firm or some agglomeration of firms such as the
strategic group or the industry as their primary level of analysis (Nag, Hambrick, & Chen, 2007).
Meanwhile, a wide variety of quantitative measures are recorded at the firm level of analysis
and then made available to the public. These measures are readily accessible; many can be
obtained for free via electronic downloading. Relying on archival proxies to gather data in this
manner is less complicated compared to the process associated with gaining access to sites and
parties for the purpose of collecting primary data dealing with a phenomenon that interests the
researcher.
Archival proxies have proven to be valuable assets to strategic management researchers, but
their use has also been a source of concern. A key issue is the construct validity of an archival proxy.
Construct validity is defined as how close of an association actually exists between a measure
and the theoretical construct that the measure is meant to represent or appropriately capture
(cf. Campbell & Fiske, 1959). In considering construct validity, a researcher asks the question,
How confident am I that I am measuring what I claim to be measuring? Some empirical methods
that are popular within organizational studies can offer a basis for strong confidence. Lab studies, for
example, can be designed to isolate the role of a particular phenomenon in shaping an outcome.
When using a questionnaire, a researcher may have the luxury of drawing on scales that have a body
of evidence tying them to underlying constructs. If not, a series of steps can be performed to develop
a new scale that taps directly into a construct of interest. Despite these advantages, Boyd, Haynes,
Hitt, Bergh, and Ketchen (2012) found that strategy researchers use of surveys and laboratory
studies declined from the 1980s to the 2000s whereas their use of archival data increased. This shift
toward greater reliance on archival data highlights the need for high-quality practices when using
proxies.
The use of archival proxies introduces unique challenges vis-a`-vis construct validity because by
definition a proxy is somewhat removed from the construct of interest. This places an extra burden
on the researcher to demonstrate that a measure is solid. As shown in Figure 1, good proxies offer a
very high degree of conceptual overlap with their corresponding constructs (i.e., strong construct
validity). Unfortunately, some archival proxies that are relied on within strategic management
studies resemble the lower portion of Figure 1 in that they appear to be poor approximations of
underlying constructs (Boyd, Gove, & Hitt, 2005; Bromiley & Johnson, 2005). When a measures
construct validity is low, the credibility of empirical findings involving the measure is also low. As a
result, findings that rely on one or more poor archival proxies are much like the castles made of sand
that music legend Jimi Hendrix sang about in 1967they may look impressive initially, but they rest
on a faulty foundation.
The purpose of this brief commentary is to set the stage for better knowledge development
within strategic management studies that rely on archival proxies. We encourage more careful use
of archival proxies by discussing the use of three prominent archival proxies within recent articles in
three leading journals. We also provide suggestions for how to validate that an archival proxy is
indeed a reasonable approximation of a theoretical construct.

The Diverse Use of Three Archival Proxies

In a recent editorial, Bettis (2012) expressed concern about the fact that multiple (perhaps
numerous) researchers with similar interests will be using the same databases at any time and also
across time (p. 109). This situation is problematic, according to Bettis, because the nature of

34

Organizational Research Methods 16(1)

Construct

Measure

A good proxy provides significant

conceptual overlap with the
construct that it is intended to
capture

Construct

Measure

A proxy is questionable to the extent

that it provides little conceptual
overlap with the construct that it is
intended to capture

Figure 1. A visual representation of proxies with strong and weak construct validity.

hypothesis testing within strategic management virtually ensures that relationships are being falsely
identified as significant when they in fact are not significant (i.e., Type I errors are being made). We
build on Bettiss concern by pointing out that across the studies using various prominent databases, it
is possibleand in some cases likelythat different researchers are using the same measure to
represent different constructs. Within such a scenario, confusion about construct validity arises
alongside the potential for Type I error. The result is lower confidence in findings.
As an illustration of how archival proxies are used to assess various constructs, we gathered all
uses of three measures (research and development intensity, patent counts, and patent citations)
within empirical articles in the Strategic Management Journal published from January 2002 to May
2012 as well as within strategic management articles published during the same period in the
Academy of Management Journal and the Journal of Management. We focused on these three
measures because of their prominence within the strategy literature (e.g., Bromiley & Johnson,
2005; Ketchen, Boyd, & Bergh, 2008). Although our approach to gathering examples was
systematic, we did not attempt to complete a formal content analysis. In addition, using a different
set of journals and/or a different set of proxies to complete this type of task would have the potential
to yield different results.
As shown in Table 1, research and development intensity has been used to measure a broad array
of constructs. In some cases, researchers appear to have achieved a tight coupling between the
measure and its corresponding construct. In other cases, however, the degree of match is arguable.
For example, some studies appear to equate activities such as investment levels with outcomes such

Ketchen et al.

35

Table 1. The Use of R&D Intensity as an Archival Proxy.

Construct Represented
Technological knowledge
Innovative knowledge assets
Technological capabilities
Technology intensity
Technology intensity
Search intensity
Differentiation strategy
R&D investment intensity
R&D intensity
Strategic investments
Industry technological
dynamism
R&D intensity
R&D investments
Managerial discretion
Technological resources
Intangible (technology) assets
Innovation capacity
Asset specificity
Absorptive capacity

Setting

Article

Public firms
Public manufacturing firms
Spanish manufacturing firms
206 U.S. publicly traded firms
Public firms
Public firms in S&P Compustat
database
Fortune 1000 firms with CEO
succession
Technology-based entrepreneurial
firms that completed IPO
Sample of UK firms from D&B
200 largest industrial Japanese
firms
279 manufacturing firms in the
1989 S&P 500
Japanese shipbuilding industry
U.S. and Japanese publicly traded
firms
Chinese firms
Manufacturing firms
Japanese firms with foreign
expansions
U.S. software firms
Manufacturing ventures in China
Biotechnology alliances

Choi & Wang, 2009, SMJ

He & Wang, 2009, AMJ
Salomon & Jin, 2010, SMJ
Makri, Lane, Gomez-Mejia, 2006, SMJ
Lepak, Takeuchi, & Snell, JOM
Chen & Miller, 2007, SMJ
Graffin, Carpenter, & Boivie, 2011,
SMJ
Kor, 2006, SMJ
Cantwell & Mudambi, 2005, SMJ
David, Yoshikawa, Chari, & Rasheed,
2006, SMJ
Uotila, Maula, Keil, & Zahra, 2009,
SMJ
Greve, 2003, AMJ
Lee & ONeill, 2003, AMJ
Li & Tang, 2010, AMJ
Iyer & Miller, 2008, AMJ
Lu & Beamish, 2004, AMJ
Lavie & Rosenkopf, 2006, AMJ
Li, Yang, & Yue, 2007, AMJ
Adegbesan & Higgins, 2011, SMJ

Note: R&D research and development; AMJ Academy of Management Journal; JOM Journal of Management; SMJ
Strategic Management Journal.

as innovations. This calls to mind a quote from Apples cofounder and legendary entrepreneur Steve
Jobs in the November 9, 1998, issue of Fortune magazine:
Innovation has nothing to do with how many dollars you have. When Apple came up with the
Mac, IBM was spending at least 100 times more on R&D. Its not about money. Its about the
people you have, how youre led, and how much you get it.
We agree with Mr. Jobs. Indeed, prominent organizational theories such as strategic choice and
contingency theory inherently assume variation in the conversion process between inputs (such as
R&D spending) and outputs (Child, 1972; Lawrence & Lorsch, 1967). If spending were closely
associated with results, then companies with rich war chests would almost always be more
innovative than their poorer rivals. Yet Apple is just one example among many companies that have
overcome competitors who have outspent them. As shown in Table 1, some proxies appear to lack strong
face validity because they rely on the (perhaps unwitting) assumption that greater amounts of spending
systematically translate into superior results. In other words, they intertwine activities and outcomes.
Tables 2 and 3 offer similar displays related to patent counts and patent citations, respectively.
Several studies have relied on patent counts to represent the quantity of a firms innovations or
inventions (Joshi & Nerkar, 2011; Kotha, Zheng, & George, 2011; Makri, Hitt, & Lane, 2010). This
approach seems face valid in part because new inventions that are meaningful departures from past
innovations are usually patented. Also, overlap between the relevant construct and its measure is

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Organizational Research Methods 16(1)

Table 2. The Use of Patent Counts as an Archival Proxy.

Construct Represented
Innovative productivity
Innovative productivity
Quantity of innovation
Quantity of innovative output
Knowledge stock
Invention quantity
Technology expertise
Inventive performance
Technological opportunities
(industry)
Innovative output
Firm inventiveness
Knowledge creation rate
Inventive effort
Innovatory performance
Technological richness

Setting

Article

Spanish manufacturing firms

Semiconductor industry
R&D consortia patent pools
Biotechnology start-ups
Biotechnology start-ups
High technology M&As
Global pharmaceutical industry
Semiconductor industry
Semiconductor industry

Salomon & Jin, 2010, SMJ

Kapoor & Lim, 2007, AMJ
Joshi & Nerkar, 2011, SMJ
Kotha, Zheng, & George, 2011, SMJ
Kotha, Zheng, & George, 2011, SMJ
Makri, Hitt, & Lane, 2010, SMJ
Fabrizio & Thomas, 2012, SMJ
Jiang, Tan, & Thursby, 2011, SMJ
Jiang, Tan, & Thursby, 2011, SMJ

Telecommunications equipment
manufacturers
Biopharmaceutical industry
Telecommunications equipment
manufacturing industry
PC industry
Semiconductor industry
Semiconductor industry

Yang, Phelps, & Steensma, 2010, AMJ

Wu, Levitas, & Priem, 2005, AMJ
Wadhwa & Kotha, 2006, AMJ
Ethiraj, 2007, SMJ
Almeida & Phene, 2004, SMJ
Almeida & Phene, 2004, SMJ

Note: R&D research and development; M&A mergers and acquisitions; PC personal computers; AMJ Academy of
Management Journal; JOM Journal of Management; SMJ Strategic Management Journal.

Table 3. The Use of Patent Citations as an Archival Proxy.

Construct Represented
Quality of innovation
Invention quality
Technological impact
Invention impact
Knowledge utilization
Innovative knowledge assets
Firm-specific innovative
knowledge
Technology similarity
Exploratory innovation

Setting
R&D consortia patent pools
High-technology M&As
Biotechnology start-ups
Publically traded firms
Fuel cell technology development
firms
Public manufacturing firms
Public manufacturing firms

Innovation quality
Knowledge spillover

Global biopharmaceutical industry

Global telecommunications
equipment industry
Telecommunications equipment
manufacturers
Semiconductor industry
Semiconductor industry

Knowledge linkage
Breakthrough innovation

Semiconductor industry
Semiconductor industry

Spillover knowledge pool

Article
Joshi & Nerkar, 2011, SMJ
Makri, Hitt, & Lane, 2010, SMJ
Kotha, Zheng, & George, 2011, SMJ
Miller, Fern, & Cardinal, 2007, AMJ
Vasudeva & Anand, 2011, AMJ
He & Wang, 2009, AMJ
He & Wang, 2009, AMJ; Wang, He, &
Mahoney, 2009, SMJ
Rothaermel & Boeker, 2008, SMJ
Phelps, 2010, AMJ
Yang, Phelps, & Steensma, 2010, AMJ
Lahiri, 2010, AMJ
Agarwal, Ganco, & Ziedonis, 2009,
SMJ
Almeida & Phene, 2005, SMJ
Srivastava & Gnyawali, 2011, AMJ

Note: R&D research and development; M&A mergers and acquisitions; AMJ Academy of Management Journal; JOM
Journal of Management; SMJ Strategic Management Journal.

enhanced in these studies by the fact that both center on the notion of quantity. Less convincing is the use
of patent counts to measure technological capabilities. One troublesome issue is that applying for and/or
receiving a patent does not demonstrate that a firm has the capability to develop the technology or put it

Ketchen et al.

37

to commercial use. In slightly different words, receiving a patent may capture an invention but may fail
to capture the set of innovation-based abilities needed to commercialize that invention.
Past patents are cited in new patent applications in an effort to show the intellectual lineage of the
new patent. It therefore seems reasonable to assert that the more a patent is cited, the greater the
impact on subsequent developments the patent has had and the more the knowledge that is embedded
in the patent has been utilized. We therefore view the use of patent citations to measure
technological or invention impact (Kotha et al., 2011; Miller, Fern, & Cardinal, 2007) and
knowledge utilization (Vasudeva & Anand, 2011) as offering high face validity.
Adopting a broader perspective, however, suggests that even if a proxy appears to be reasonable
within the context of an individual study, its use among different studies to represent different
constructs creates serious problems. Suppose, for example, an archival measure is used in five
different studies to measure five different constructs. It would be difficult to believe that all five uses
can be correct, even if each of them appears face valid when considered in isolation. Taking this issue
one step further, the interpretation of findings involving such a measure is quite difficult. Consider a
situation wherein a scholar is (a) interested in the relationship between strategic investments and market share and (b) has used research and development intensity as a proxy for the construct of strategic
investments. If an empirical test shows that research and development intensity is indeed related to
market share, there appears to be no inherent basis to be confident that this effect reflects the role
of strategic investments rather than those of the various alternatives listed in Table 1, such as technological capabilities, managerial discretion, asset specificity, and absorptive capacity.

Toward Stronger Proxies

Before examining how to nudge the strategic management field away from relying on questionable
proxies, it is useful to first consider why questionable proxies have been tolerated in the past. One
possible reason is that knowledge development within the social sciences is a socially constructed
process wherein certain practices become institutionalized (Mizruchi & Fein, 1999).
In particular, it seems that perhaps the strategic management field has engaged in a process
that Popper (1959) referred to as conventionalism. As Ferguson and Ketchen (1999) note,
conventionalism is
the tendency of scientists to agree on issues rather than debate them and then act as if what they
have agreed upon is scientific fact. The actual foundation for the use of 0.05 [as the cutoff for
statistical significance] is not logic, but simply an ad populum argument: because we all
believe, it must be true. (p. 387)
Beyond the choice of alpha, conventionalism appears to surround the use of significance tests and
effect sizes in assessing the degree to which a studys hypotheses are supported (Cohen, 1994;
Cortina & Landis, 2011).
It seems likely that the use of certain accounting measuresresearch and development intensity,
advertising intensity, selling, marketing, and administrative expenses, among othersas archival
proxies has simply been accepted as reasonable over time. Any scholar wishing to rely on these
measures can draw from and cite a large array of previous studies that also used the measures. In
addition, the acceptance of these measures by scholars within other business disciplines
(e.g., accounting and finance) appears to further support the use of such measures.
A second possible reason why questionable proxies have been tolerated in the past has its roots in
the time-tested mantra that all research is flawed. Because all research designs have limitations,
editors and reviewers have been encouraged to consider a studys weaknesses within the context of
the quality of the entire research design. With the notion of trade-offs in mind, it seems likely that the

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Organizational Research Methods 16(1)

presence of one or more questionable proxies might be forgiven by gatekeepers to the extent that a
study examines important questions, builds valuable theory, tests interesting hypotheses, relies on a
suitable sample, and includes other measures that are robust.
These two possible explanations lead us to offer three actionable suggestions for improving the
use of archival proxies within strategic management research. First, scholars using an archival
measure as a proxy for a construct should identify whether the measure has been used in the past
as a proxy for another construct and, if so, demonstrate which usage is correct. Second, rather than
authors and gatekeepers assuming that the use of a particular proxy is reasonable (i.e., conventionalism), gatekeepers should actively break free of institutionalized norms (Mizruchi & Fein, 1999) by
requiring authors to provide sound logic for and empirical validation of their archival proxies.
Providing sound logic to support a proxy involves explaining why the author believes a very
significant conceptual overlap exists between the proxy and the construct that it is purported to
assess. Proxies that require difficult-to-defend assumptions about causality are unlikely to pass this
test. In terms of empirical validation, we recommend that scholars draw on insights from industry
experts such as other scholars, executives, investment officers, and stock analysts. Such experts
could serve as a helpful validity check. A good exemplar is Hambrick and Abrahamson (1995).
These authors compared archival measures of managerial discretion, the views of a panel of
academics on discretion, and the views of a panel of security analysts on discretion. Although the
three assessments were significantly correlated, some archival measures fared better than others
in this triangulation process. Indeed, two archival measures of discretionregulation and demand
instabilitywere unrelated to panelists assessments, possibly reducing the confidence that could
be placed in findings that rely on these measures as proxies for managerial discretion.
Third, rather than viewing a dubious proxy as an excusable limitation within an otherwise
reasonable research design, gatekeepers should treat poor proxies as potentially fatal flaws.
We believe that gatekeepers should view measures role within research studies as akin to what
stilts are to a beach house. If any one of the stilts supporting a beach house is faulty, a section
of the house will inevitably fall into the sea, regardless of the quality of the other stilts and the
craftsmanship embedded in other elements of the house. Similarly, if a measure does not effectively capture the construct that it is purported to capture, any statistical tests involving the measure cannot be considered valid. Authors should therefore be required to replace a faulty proxy
with a defensible one or to remove hypothesis tests that involve the faulty proxy from their study.
If one of these two remedies cannot be applied, the study (unfortunately) should be considered
fatally flawed.
The actionable suggestions we offer here have a stronger likelihood of being implemented
initially by those serving as gatekeepers for the more highly valued, established, and respected
journals. Commonly known as Class A outlets or top-tier journals, these publishing outlets
have the requisite level of influence with scholars to request or even demand appropriate
adjustments to scholarly work that is eventually accepted for publication. In this manner, the social
desirability of the suggestions we offer here has the potential to be rapidly diffused through a
cascading approach with other journals publishing strategic management scholarship.

Conclusion
The difficulties surrounding archival proxies with poor construct validity are not limited to strategic
management research. More than 50 years ago, Valavanis (1959) noted that
Econometric theory is like an exquisitely balanced French recipe, spelling out precisely with
how many turns to mix the sauce, how many carats of spice to add, and for how many
milliseconds to bake the mixture at exactly 474 degrees of temperature. But when the

Ketchen et al.

39

statistical cook turns to raw materials, he finds that hearts of cactus fruit are unavailable, so he
substitutes chunks of cantaloupe; where the recipe calls for vermicelli he uses shredded wheat;
and he substitutes green garment dye for curry, ping-pong balls for turtles eggs, and, for Chalifougnac vintage 1883, a can of turpentine. (p. 83)
Strategic management researchers should not resign themselves to metaphorically using paint thinner to represent a fine French wine, however. Now that the strategy field is several decades old and is
consistently moving toward increasing acceptance in terms of scholarly legitimacy, we should adopt
demanding standards where archival proxies are concerned. In particular, steps should be taken to
ensure that all archival proxies within a study are effective at capturing the constructs they are
intended to represent. Doing so will help ensure that a studys findings stand the test of time rather
than eventually collapsing like a castle made of sand. Subsequently, standing the test of time provides the type of foundation required for a field to continuously advance with respect to the value
it creates for both scholars and practitioners.
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or
publication of this article.

Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.

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Author Biographies
David J. Ketchen, Jr. (ketchda@auburn.edu) serves as Lowder Eminent Scholar and Professor of Management
within the College of Business at Auburn University. His research interests include entrepreneurship and franchising, methodological issues in organizational research, strategic supply chain management, and the determinants of superior organizational performance. He is a former associate editor for Organizational Research
Methods.

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R. Duane Ireland (direland@mays.tamu.edu) is a University Distinguished Professor and holds the Conn
Chair in New Ventures Leadership at the Mays Business School, Texas A&M University. His research interests
include resource orchestration, managing in the informal economy, strategic entrepreneurship, and corporate
entrepreneurship. He is the current President Elect of the Academy of Management.
LaKami T. Baker is an assistant professor of management at Auburn University. She received her PhD from
the University of Texas at San Antonio. Her current research focuses on strategic leadership, top management
team dynamics, and corporate social performance.