Dear Statalist Community,

I was wondering about good practice in economcetric research, in particular in the field of Strategic Management. I am working on a project where we could potentially have an issue of reverse causality. We look at a relationship from the following sort:

firm_strategy + controls --> firm_performance

And in our specific context, there is for example potential reason to assume that firm_performance might also influence which firm_strategy a company chooses. Regarding our paper submission, we plan to go about this reverse causality issue in the following way (not perfect, but the best we can do with our data, I fear):
  • (1) For the main part of the data/findings section of the paper, we plan to have a simple RE regression. We control for past firm_peformance to address reverse causality
  • (2) And, in order to look at the issue of reverse causality in more detail, we plan to report results from a 2SLS in the robustness section of the paper. But we plan to report 2SLS results only later on in the paper, in a later 'robustness check' section. The instrument we are thinking of is "CEO_change". (There is good reason to assume it drives our firm_strategy, but that it does not have a direct causal link on firm_performance)
So in the above context, my question relates to point (1) -- to the "normal" RE regression in the main data/findings section of the paper:​​​​​​
  • Here, is it seen as good practice to include our instrument already in the regression in this main regression? Should we include CEO_change as a control variable already in this regression specification? Or is it not necessarily required to include the variable that we later on in the paper use as an instrument as a control already?
Thanks so much in advance.

Franz