Financial Literacy as More than Knowledge: The Development of a Formative Scale through the Lens of Bloom's Domains of Knowledge

For well over a decade, financial literacy has been a primary lens through which researchers approach financial education. Unfortunately, in most cases, this potentially rich construct is reduced to mere financial knowledge. This myopic conceptualization hampers the development of the concept and programs to build financial literacy. Despite research that reveals these limits, the field has either persisted with this narrow definition of financial literacy or abandoned the model altogether in favor of capability or similar constructs. Using Bloom's domains of knowledge, we redefine financial literacy as the combination of three different indicators reflecting three domains of knowledge: financial skill, self‐efficacy, and explicit knowledge. Using data from a national survey, we apply the methods of formative scale development to construct and validate a more robust conceptualization and measurement of financial literacy. We explore how this financial literacy index might inform development of innovative financial education programs.     

Advancing formative measurement models

Formative measurement models were first introduced in the literature more than forty years ago and the discussion about their methodological contribution has been increasing since the 1990s. However, the use of formative indicators for construct measurement in empirical studies is still scarce. This paper seeks to encourage the thoughtful application of formative models by (a) highlighting the potential consequences of measurement model misspecification, and (b) providing a state-of-the art review of key issues in the formative measurement literature. For the former purpose, this paper summarizes findings of empirical studies investigating the effects of measurement misspecification. For the latter purpose, the article merges contributions in the psychology, management, and marketing literatures to examine a variety of issues concerning the conceptualization, estimation, and validation of formative measurement models. Finally, the article offers some suggestions for future research on formative measurement.     

Threats to the Validity of Logistics and Supply Chain Management Research

To increase the relevance of logistics and supply chain academic research, this paper recommends the development and testing of middle‐range theory and practice‐level theory. Yet, there are a number of research issues that arise when academic researchers test middle‐range and practice‐level theory, both in measuring constructs and in testing theoretical relationships between constructs. Concerning the measurement of constructs, this paper recommends that academic researchers pay more attention to content validity and undertake rigorous processes to ensure content validity. In addition, academic researchers need to more explicitly define constructs as either reflective or formative. If the construct is defined as formative, then the traditional statistical approaches to validate these measurement scales are not recommended. The appropriate use of employing single‐item measures for concrete constructs is discussed. In regard to conducting hypothesis tests, research issues associated with multicollinearity and omitted variable bias are discussed. Relative weight analysis is ideal for testing theoretical models and research hypotheses when survey data are obtained, multicollinearity is present, and there are a large number of independent variables predicting a dependent variable. Thus, relative weight analysis is ideal for testing research hypotheses in logistics and supply chain management.     

Service value revisited: Specifying a higher-order, formative measure

Recent marketing literature pays particular attention to customer value because of the potential impact on customer behavior and, ultimately, firm performance. Whereas some studies conceptualize customer value in a unidimensional manner, more recent approaches take a multidimensional approach, generally conceptualizing value as composed of various benefits and sacrifices. However, nearly all of these studies consider value components in a reflective manner, which is not only problematic but in many cases conceptually incorrect. In addition, recent customer value research includes service components to define and operationalize the construct. This study suggests that customer value in service contexts, or service value, represents a higher-order, formative construct with benefit and sacrifice components. Specifically, the authors propose a formative model of service value with four components: service quality, service equity, confidence benefits, and perceived sacrifice. A multiple-industry study substantiates the contention that this higher-order, formative approach best models value. The results theoretically and empirically support the conceptualization of service value with formative components, and the measure is robust and works well across multiple service contexts.     

Relationship-Oriented Cultures, Corruption, and International Marketing Success

This study explores the general problems associated with marketing across international markets and focuses specifically on the role of corruption in deterring international marketing success. The authors do this by introducing a broader conceptualization of corruption. The dimensions of corruption and their importance in explaining the exporters’ successes in international markets are developed empirically. Partial Least Squares formative indicators are used in a comprehensive model including consumer resources (wealth and information resources), physical distance (kilometers and time zones), and cultural distance (linguistic and values differences) as alternative explanatory variables. Finally, differences in the model’s performance across data from three exporting countries (France, Japan, and the US) are delineated and discussed. For example, the successes of French and Japanese exporters in international markets are in part determined by the levels of corruption in target countries. Alternatively, corruption in target countries does not appear to affect the successes of American exporters in global markets. The conceptualization of corruption in this study extends the more narrow view of corruption solely as bribery.     

Reflective and formative metrics of relationship value: Response to Baxter's commentary essay

This article responds to some of the issues Baxter [Baxter R., Reflective and formative metrics of relationship value: a commentary essay. Journal of Business Research; 62: 2009.] raises in his recent commentary essay on the special issue of Journal of Business Research (61/12”) on formative indicators. This response shows that poor construct definitions underlie the apparent formative versus reflective controversy and that sound model specifications rest on sound conceptual definitions of the focal construct.     

Specifying formatively-measured constructs in endogenous positions in structural equation models: Caveats and guidelines for researchers

Formatively-measured constructs (FMCs) are increasingly used in marketing research as well as in other disciplines. Although constructs operationalized by means of formative indicators have mostly been placed in exogenous positions in structural equation models, they also frequently occupy structurally endogenous positions. The vast majority of studies specifying endogenously-positioned FMCs have followed the common practice of modeling the impact of antecedent (predictor) constructs directly on the focal FMC without specifying indirect effects via the formative indicators. However, while widespread even in top journals, this practice is highly problematic as it can lead to biased parameter estimates, erroneous total effects, and questionable conclusions. As a result both theory development and empirically-based managerial recommendations are likely to suffer. Against this background, the authors offer appropriate modeling guidelines to ensure that a conceptually sound and statistically correct model specification is obtained when a FMC occupies an endogenous position. The proposed guidelines are illustrated using both covariance structure analysis (CSA) and partial least squares (PLS) methods and are applied to a real-life empirical example. Implications for researchers are considered and ‘good practice’ recommendations offered.     

Customer equity management as formative second-order construct

Despite intensive discussions about customer equity, little research addresses how to manage customer equity from a firm's perspective. Recent literature proposes various concepts of customer equity management but does not feature an empirical study that identifies and quantifies activities that aim explicitly to maximize customer equity. In the current study, the authors develop a formative measurement instrument for customer equity management as a second-order construct that indicates how intensively firms orient their customer management toward customer value and equity. The study presents a complete process for conceptualizing and operationalizing a formative second-order construct, including a thorough literature review, intensive qualitative research, and a quantitative study with 92 customer equity managers. On the basis of this process, the authors model customer equity management as a function of three formative dimensions - customer equity analysis, customer equity strategy, and customer equity actions - measured by several formative indicators. The resulting formative operationalization satisfies the criteria for evaluating formative indexes.     

Relationship Value in Business Markets: The Construct and Its Dimensions

ABSTRACT

In recent years, the concept of relationship value has attracted increasing attention among marketing researchers and practitioners alike. Despite a growing body of literature in this area, no generally accepted conceptualization of relationship value has emerged from the marketing literature. The present paper investigates the theoretical foundations of relationship value and identifies seven underlying dimensions. It is suggested that relationship value should be conceptualized as a formative, multi-dimensional, higher-order construct. This conceptualization is tested using data from a cross-sectional survey among some 200 purchasing managers from manufacturing companies. The scale development process is presented and directions for future research are discussed.     

Flow Online: Lessons Learned and Future Prospects

Although the flow construct has been widely studied over the past decade in marketing and related fields, it has proven to be an elusive construct to measure and model. In this paper, we examine two of the most important themes in flow research in the last decade: the conceptualization and measurement of flow in online environments and the marketing outcomes of flow. In addition, while the unique characteristics of the Internet contributed to our belief that flow was an important construct for understanding consumer use of the Web in 1996, the environment of the Web itself has changed radically over the past decade. Thus, we consider the current context of the Internet, including virtual worlds, for the role and application of the flow construct, as well as important related constructs that will be useful for understanding compelling experiences in the contemporary online environment.     

Bridging Design and Behavioral Research With Variance-Based Structural Equation Modeling

Advertising research is a scientific discipline that studies artifacts (e.g., various forms of marketing communication) as well as natural phenomena (e.g., consumer behavior). Empirical advertising research therefore requires methods that can model design constructs as well as behavioral constructs, which typically require different measurement models. This article presents variance-based structural equation modeling (SEM) as a family of techniques that can handle different types of measurement models: composites, common factors, and causal–formative measurement. It explains the differences between these types of measurement models and clears up possible ambiguity regarding formative endogenous constructs. The article proposes confirmatory composite analysis to assess the nomological validity of composites, confirmatory factor analysis (CFA) and the heterotrait-monotrait ratio of correlations (HTMT) to assess the construct validity of common factors, and the multiple indicator, multiple causes (MIMIC) model to assess the external validity of causal–formative measurement.     

The impact of service quality and marketing on financial performance in the hospital industry: an empirical examination

Service quality and service marketing have both been studied extensively in relation to service organizations. In this paper we examine these areas simultaneously in terms of their impact on financial performance in the hospital industry. Drawing from the literature in the quality and service marketing areas, the area of service quality is represented in terms of the constructs of quality context and quality outcomes. Quality context (QC) describes the environment related to quality practices within a hospital which generally encourages and enhances service quality while quality outcomes (QO) comprises of specific clinical and patient satisfaction outcomes of the hospital. The area of marketing is represented in terms of the constructs of marketing orientation and market/product development outcomes. Market orientation (MO) is a well accepted, albeit complex, construct within the marketing literature. Generally, market orientation can be thought of as the process of effectively collecting, disseminating, and responding to information in order to enhance the marketing function within the hospital. Such information generally relates to market trends, customers, and competitors. Market/product development outcomes (MPD) refer to specific outcomes in relation to product innovation and market segmentation that are general indicators of the marketing effectiveness of the hospital. Although the evidence in the literature suggests that both service quality and marketing are independently related to organizational performance, the precise nature of the relationships among the variables described above is not clearly understood.Based on theoretical considerations, we propose a framework linking the above-mentioned constructs to the financial performance (FP) of an organization. Since QC and MO are theorized to be multidimensional constructs we use the technique of structural equations modeling (SEM) to test the model. Data were collected for the study from hospitals in a five-state region in the US. The results show that the constructs related to both service quality and marketing impact on financial performance. However, the results do not support the proposed framework of relationships. Instead, the results support a sequential chain of relationships among the constructs where MO mediates the effect of QC on QO, and MPD mediates the effect of QO on FP. Implications of these results for the hospital industry as well as for future research in the area are offered.     

An integrative model of consumer satisfaction in the context of e‐services

This research examines how customer satisfaction affects its antecedent and outcome variables such as expectation, performance, disconfirmation, word‐of‐mouth, brand loyalty, attribution and repurchase. This research also takes the important integrative step of understanding the consumer behavioural constructs of consumer satisfaction. Although researchers have focused on the antecedents of consumer satisfaction, our integrative model has extended the outcomes of consumer behaviour on consumer satisfaction. Furthermore, this model strongly suggests a positive view of the inter‐relationships between the antecedent variables and outcome variables of satisfaction. In particular, our model is not consistent with Oliver's attribution models in which satisfaction is a consequence of attribution processing. All hypothesized variables were supported by our empirical study. The findings present a variety of guides to formulating marketing strategies for both practitioners and academics.     

Formative vs. reflective measures: Facets of variation

Research that treats observed measures of a business construct as a function of a latent true score plus random error is making two strong assumptions. The first, the assumed direction of causality, has generated the burgeoning formative measurement literature to which Cadogan and Lee (2013) contribute. The second is overlooked. Classical test theory assumes there is only one legitimate source of variance. Academics validating measures of business constructs invariably assume that this source is their respondents, who can be managers, employees, or customers, depending on the context (i.e. business discipline). The invoked causality accounts for covariance at the respondent level, ignoring whether it also applies to other sources of variance—such facets as brands, companies, departments, locations, service providers or work groups. Researchers need to be clear about a business construct's conceptual domain, about the sources of variance that are focal to the theoretical relationships being investigated, and whether the construct's relationship with its indicators is formative or reflective for each facet.     

The age-effect of financial indicators as buffers against the liability of newness

This paper builds on the liabilities of newness literature to suggest that accounting information is important for new firms. Using a sample of over 30,000 companies followed during their first 7 years of existence, we find evidence that financial indicators mitigate the liability of newness and that this buffering effect is stronger the younger the organization. These results represent three primary contributions to the literature. First, our conceptualization of accounting measures as indicators of external (creditworthiness enhancing legitimacy) as well as internal (targets for management) buffers to the liabilities of newness provides a novel way of viewing these constructs and explains why they are important to new firms despite their uncertainty and opacity. Second, we theoretically justify and empirically validate that these constructs are more important the younger the new firm is, which runs counter to the common wisdom of these constructs in the entrepreneurship literature. Third, we identify buffers against failure for new firms that are generalizable across industries.     

Attachment styles and customers' long-term relationships in a service context

The main objective of this study is to use attachment styles theory to explore long-term relationships in a service context using the mobile market as a case study. Attachment theory focuses on the primary link between maternal loss or deprivation and later personality development. This theory was extended to adult life and commercial contexts. Three attachment styles (secure, avoidant, and anxious) were used as the independent variables. Commitment and trust, as constructs of any relationship, were employed as the mediating variables, while intention to stay and cooperation were adopted as the dependent variables, as indicators of long-term commercial relationships. A random sample of 1024 members of an online panel participated in the online survey. Structural equation modelling was performed to measure the validity of the constructs through confirmatory factor analysis, and to assess the hypothesized model as a single theoretical structure using path analysis. Associations were found between most of the study variables. Significant mediation effects were found between attachment styles and long-term relationship indicators, intention to stay, and cooperation, with trust and commitment as the mediators. This study employs a unique theoretical model that has not been previously tested. The model and findings demonstrate that primary psychological structures play a role in creating and maintaining long-term relationships.     

Inferential Evaluations of Sustainability Attributes: Exploring How Consumers Imply Product Information

Consumers are often confronted with incomplete product information. In such instances, they can eliminate the product from further consideration due to higher associated uncertainty or ask for more information. Alternatively, they can apply subjective theories about covariation to infer the value of missing attributes. This paper investigates the latter option in the context of sustainability and provides an in‐depth exploration of consumers’ inference formations. Drawing from rich qualitative data, it offers a conceptualization of the underlying relationships consumers use to infer product sustainability based on other product attributes. The study further assesses whether these findings can be captured in a quantifiable way. To this end, inferred sustainability is conceptualized as a formative second‐order construct, thereby depicting the influence of inference‐triggering product attributes.     

Operationalizing Trust,Reliance, and Dependence in Business Relationships: Responding to the Ongoing Naming and Cross-Level Problems

Purpose: This article is to test the proposition that the 3 conceptually related constructs of trust, reliance, and dependence are distinct from each other and to test the proposition that the quality of business relationships can be measured with a formative index incorporating trust and reliance.

Methodology/Approach: The authors' propositions are tested with a survey sample of 221 firms in the U.K. construction industry. Exploratory and confirmatory factor analyses are used to analyze the survey data.

Findings: The independence of the 3 focal constructs of trust, reliance, and dependence is confirmed. The formative index is found suitable for evaluating the level of relationship quality in which reliance carries more significant weight than trust.

Research Implications: The separation of the overall construct of “trust” into trust at interpersonal level and reliance at interorganizational level, as found in this study, overcomes the problem existing in past studies that researchers rarely specify at which level trust operates. The clear conceptual distinction between reliance and dependence as found in this study implies that although both operate at the organizational level, they do not have overlapping boundaries. The finding that reliance is a more important impact factor than trust in constructing the formative index supports the notions that reliance is a necessary and sufficient condition for developing sustainable business relationships, and trust is an insufficient condition to sustain an ongoing business relationship.

Practical Implications: Reliance sets the keynote of the business relationship. In contrast, trust as the interpersonal variable only acts as the facilitator to create a favorable social environment. Nevertheless, both trust and reliance have a significant and positive weight in the relationship quality index formed. This means that a business relationship with high levels of both trust and reliance is particularly resilient and stable and is the most successful and desirable one which is frequently oriented toward the long run.

Originality/Value/Contribution: The confirmation of the difference between trust and reliance makes an important contribution to the study of trust in business to business marketing by showing that what has traditionally been treated as theoverall construct of trust can and should be regarded as being made up of two separate constructs: interpersonal trust and interorganizational reliance. The difference between reliance and dependence as an additional finding makes another important contribution by providing conceptual clarity of the two constructs and confirming that there is no overlapping boundary between them. The formative index and the relative importance of its components are another important contribution of this study.     

Fear Of Missing Out Scale: A self-concept perspective

Fear of missing out (FOMO) is an emerging topic in consumer psychology. However, the theoretical foundations of FOMO are underdeveloped and extant FOMO scales confine the construct to the context of social media. Without a theoretical foundation and a new FOMO scale, the future development of research on this promising phenomenon is limited. This article provides a new conceptualization of FOMO and a new FOMO scale. Using self-concept theory, the authors propose that FOMO is an emotional response to perceived psychological threats to one's self-concept. Because the self-concept involves a private and a public self, FOMO involves two dimensions: a personal FOMO and a social FOMO. Accordingly, a new scale was developed. The results of four studies support the validity and reliability of the two-dimensional scale. This new conceptualization and scale will enable consumer researchers to examine FOMO in a broader set of contexts, test the relationship between FOMO and related constructs, and develop a nomological network around the construct.     

Explicating the Reverse Internationalization Processes of Firms

ABSTRACT

Reverse internationalization (RI) is a crucial phenomenon in a world of globalization; however, research on RI remains scarce. In light of the 2008–2009 economical global crises, many internationalizing firms worldwide have deinternationalized. Given that scholars and functionaries have been sending warning signals about imminent global crisis, revisiting the RI domain and its drivers is a timely and important research area.

This study uses a qualitative approach with a prime objective of exploratory work and theory development of RI. The study explicates the RI phenomenon further, proposes a broader RI conceptualization and an operational definition, and develops propositions and a model to direct future research and assist managers. Grounded in data emerged from field in-depth interviews of senior managers, findings show that RI emerges as a multifaceted formative construct reflecting a reduction in firms’ activities on one or more explicit dimensions. Various internal and external factors foster RI. Since firms apply sophisticated forms of international involvement, RI domain should address its wide-ranging forms with a clearer and richer view that facilitates its conceptualization. Managers learn to pay attention to likely scenarios where episodes in internationalization may arise and lead to RI and of ways to approach them.