1. Controlling Contaminating or “Nuisance” Variables
Read the toy factory example on handout.
We have 60 people for an experimental study. We want to divide them into four groups to test the causal effect.
Method 1: Matching Groups: spread different levels of contaminating variables among groups
If we think gender is a contaminating factor, and we have 60 people with 20 females – 40 males, then each group can be assigned 5 women and 10 men.
Problems:
Are we sure we controlled “all” nuisance variables?
Can the groups be spread so fluently?
Sekaran, U. & R.Bougie, Research Methods for Business, John Wiley and Sons Inc., 2010, p.231.

2. Controlling Contaminating or “Nuisance” Variables
Method 2: Randomization: Assign all members randomly without any predetermination such that every member has a known and equal chance of being assigned to any of the four groups. Selection process and group assignment process are both random.
Contaminating factors have an equal probability of being distributed among groups.
Any errors or biases caused by age, sex, and previous experience are now distributed equally among all four groups.
Both problems of Method 1 are solved with randomization. Now we can measure the results.
Sekaran, U. & R.Bougie, Research Methods for Business, John Wiley and Sons Inc., 2010, pp

3. Cause and Effect Relationship After Randomization
EG 1: $1/piece
EG 2: $1,50/piece
EG 3: $2/piece
CG (no treatment): Old hourly rate
If % increases in production are, 10, 15, 20, and 0 respectively, we can say that there is a causal relationship because through randomization we can now assume that we controlled for all the contaminating variables.
Sekaran, U. & R.Bougie, Research Methods for Business, John Wiley and Sons Inc., 2010, p.232.

4. Internal vs. External Validity
Internal Validity: How confident are we in the cause-and-effect relationship?
In lab experiments, internal validity is higher so our confidence in the causality of the relationship is higher.
External Validity: To what extent are the results found in the lab setting generalizable to the real environment?
Field Experiments are done for this purpose. We may not control all nuisance variables but the treatment can still be manipulated.
Sekaran, U. & R.Bougie, Research Methods for Business, John Wiley and Sons Inc., 2010, p.233.

5. The Field Experiment
An experiment done in the natural environment in which treatments are still given to one or more groups
Nuisance variables cannot be controlled but manipulation can still be done.
“Lower internal validity” but “Higher external validity”
Trade-off between internal and external validity:
Researchers who do not want to give up both have to run both experiments.
If there are three different shifts in a production plant, the effects of the piece rate system can be studied on them with a field experiment. One of the shifts can be the control group; the other two shifts can be given two different levels of treatment and we may look at the results. But, have we controlled all the factors?
Sekaran, U. & R.Bougie, Research Methods for Business, John Wiley and Sons Inc., 2010, p