Testing for Control System Interdependence with Structural Equation Modeling: A Research Note with the Levers of Control (LOC) Framework As Example

This research note deals with how to test for and evaluate interdependence among control elements that are jointly determined (a system) using structural equation modeling (SEM). Empirical research on the levers of control (LOC) frame work is used as example. In LOC-research a path model approach to interdependence has been developed. The appropriateness of this method is evaluated and in the article I instead develop SEM models that implement seemingly unrelated regression (SUR) and test them on a data set of 120 SBUs in Sweden. The empirical results suggest that modeling interdependence among control practices in a system as paths, instead of residual correlations, evidently underestimates the strength of interdependence.