In the Kor (2006) paper, link given below, author has discussed in result section that squared value of Managers' firm tenure tells that small value of squared firm tenure says nonlinear negative relationship with R&D investment. I am unable to decipher these panel data regression model. Please guide me in understanding this.
(https://www.researchgate.net/publication/229874008_Direct_and_Interaction_Effects_of_Top_Management_Team_and_Board_Compositions_on_RD_Investment_Strategy)
Dear Manali
Once I used square of ind-variable in my thesis to find U-Shaped relationship between dep&indep variables. For your study, I attached the link below. I hope you will find it in best of your interest.
Good Luck
https://www.researchgate.net/publication/322635157_Determinants_of_women%27s_labour_supply_in_Bangladesh_and_Pakistan
Hi,
This is the parag with the model:
From that we understand the authors found the value of the firm tenure coefficient (which is negative) is relatively much larger than the value of the squared firm tenure coefficient (which is positive), accordingly they concluded the relation is negative, with the support of the plot.
R&D investment intensity decreases with mangers firmtenure of decreasing rate negative sign of analysis as aresults of author ,the negative relationship between investment and value squered of firm can be explained the use of GLS panel date to have the negative or positive relationship,the result of U-shape represents non linear relationship between turner firm manger and investment.
squared values have inherent property of non-linearity. so, it is the most common practice to use squared values of a variable to incorporate non-linearity effect into the model.
please find enclosed an graphical representation of the properties of squared values with an hypothetical example of number from 1 to 20 with original and squared values
further discussion in this regard is most welcome.
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