Being Both Too Liberal and Too Conservative: The Perils of Treating Grouped Data as though They Were Independent

Organizational data are inherently nested; consequently, lower level data are typically influenced by higher level grouping factors. Stated another way, almost all lower level organizational data have some degree of nonindependence due to work group, geographic membership, and so on. Unaccounted-for nonindependence can be problematic because it affects standard error estimates used to determine statistical significance. Currently, researchers interested in modeling higher level variables routinely use multilevel modeling techniques to avoid well-known problems with Type I error rates. In this article, however, the authors examine how nonindependence affects statistical inferences in cases in which researchers are interested only in relationships among lower level variables. They show that ignoring nonindependence when modeling only lower level variables reduces power (increases Type II errors), and through simulations, the authors show where this loss of power is most pronounced.