Dear Statalists,

I am struggling with choosing firm or industry fixed-effect for my regression with unbalanced panel data of around 800 firms of 48 industry sectors over 12 years.

I got y is the dependent variable, and x is my main variable of interest, with 6 other control variables

In the regression with firm fixed-effect, the coefficient of x is negative and significant at 1%

Code:
areg y x var1 var2 var3 var4 var5 var6 i.year, absorb(firm) ro
But in the regression with industry fixed-effect, the coefficient of x is positive and significant at 1%

Code:
areg y x var1 var2 var3 var4 var5 var6 i.year, absorb(industry) ro
So choosing firm vs industry fixed-effects flips the signs (also the values) of the coefficients. Prior research in the literature used industry fixed-effects, but the literature also suggests the coefficient of x should be negative, which is what I expect.


Also, I have tried to put in and out the controls, and I found that one of the controls - var1, if I keep it in the models, the sign of x will changes along with the changes of the type of fixed-effects. But if I exclude var1, either firm or industry fixed-effects, the sign of x does not change. The correlation between x and var1 is 0.41***, and I check vif values below 4, so it could not be the multicollinearity here. Other correlations among other variables are low (below 0.1) as well.

So I am not sure if the sign flipping results from the fixed-effect choices or from the var1.

Can anyone suggest which fixed-effect I should choose (if it comes from the issue choosing the fixed-effects)?

If the issue from the var1, is the var1 more sensitive to firm fixed-effect than industry-effect? If so, is there any way to mitigate its sensitivity, so that it won't affect to change the sign of my main variable?

I really appreciate your help.

Ken

p/s: my question is more about choosing fixed-effects, so it seems that I should not upload a data sample here.