Physics envy and natural experiments in business and economics

Research in Business is becoming increasingly quantitative and business scholars are aspiring to achieve the same standards of academic excellence that hard disciplines demand. Researchers in the domains of Economics, Finance, Human Resource, Marketing and Industrial Organisation, among others, are trying to mimic the principles of Physics by building complex mathematical models and conducting experiments. Since the scope for field experiments in Business and Economics is limited, scholars of these disciplines are increasingly employing natural experiments for research that aims to explore causal relationships in observational studies. Natural experiments are means to overcome some of the obstacles that researchers face while making causal inferences. To compare the actual with counterfactual, the difference-in-difference methodology has seen many advances in recent years. However, mimicking research in Physics comes at a cost. Businesses often deal with situations that have significantly more uncertainty than what Physics addresses. So when researchers in business studies employ techniques that are inappropriate for the level and type of uncertainty involved, conclusions are often revealed to be wrong.