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.     

Questions about formative measurement

A growing body of literature addresses the issue of formative measurement. However, questions remain regarding the nature of formative measures, their properties, and their usefulness, especially in the context of theory testing and structural equations modeling. This paper poses an incomplete list of questions and suggests possible answers to them, and concludes that the use of formative measurement remains problematic in theory testing research.     

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.     

The quality of market-oriented behaviors: Formative index construction

Current measures of market orientation do not systematically capture the quality of market-oriented behaviors [MOBs] (Jaworski BJ, Kohli AK. Market orientation: review, refinement, roadmap. Journal of Market Focused Management 1996;1[2]:119-135). In a bid to address this issue, the authors develop formative indices of the key factors underlying market-oriented behavior quality, and empirically validate the indices using survey data from a sample of 253 marketing managers. Findings suggest that optimal market-oriented behavior involves many distinct activities, such as speed and formalization of information generation, dissemination and response, quantity of information generated, comprehensive information dissemination, and extent of information use, to name a few. For researchers, the findings expand the platform from which to generate fresh understanding of MOBs' antecedents and consequences. The indices also have diagnostic capabilities which can help managers understand how to improve the quality of market orientation within the firm.     

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.     

Reflective and formative metrics of relationship value: A commentary essay

The Journal of Business Research special issue (61/12) covers controversy about formative versus reflective model specification. This essay comments on that special issue and illustrates specific points relating to the controversy by discussing recent studies of business-to-business relationship value, comparing their differing specifications, and noting that the variations of specification result from quite distinct conceptualizations. The essay makes the more substantive conclusion that the differences in conceptualization result from more than one underlying streams of research and that each stream is conceptually quite distinct and needs to follow its own direction for future research. The specific case of relationship value illustrates the broad necessity for researchers to consider in-depth how they conceptualize models. Other research areas have distinct research streams that lie behind different conceptualizations and specifications that researchers must nurture explicitly if useful ontology is to develop effectively.     

Comment on “Improper use of endogenous formative variables”

Cadogan and Lee's point can be made simpler by referring to the basic math underlying these relationships. The larger problem with this paper, as with the bulk of the formative measurement literature, is a failure of imagination, which is holding back progress in a variety of fields.     

The effects of entrepreneurial orientation, market orientation, and marketing subunit influence on firm performance

The study investigates how an organization’s entrepreneurial orientation moderates the interplay between market orientation and marketing subunit influence on firm performance. The hypothesized model predicts that the positive interaction between market orientation and marketing subunit influence has a weaker effect on firm performance under conditions of high entrepreneurial orientation. The regression and supplementary analyses provide support for most predictions and, most importantly, for a negative three-way interaction effect: At higher levels of entrepreneurial orientation, the positive moderating effect of marketing subunit influence on the market orientation–business performance relationship is reduced. The authors discuss the managerial and theoretical implications of their findings and provide a number of directions for further research.

Definition and psychometric validation of a measurement index common to website and store images

To mesh together their channels and better handle their multichannel management, retailers must better evaluate and coordinate their various channels. They need more precise and more complete measurement instruments to compare the channels in terms of characteristics perceived by their customers. Using the procedure specific to formative variables, this research results in a particularly comprehensive measurement index that culls 10 channel image dimensions (offering, price, layout, accessibility, promotions, customer service, advice, reputation, institution, connections with other channels) from the 40 strictly identical items for the website and the stores. Various qualitative and quantitative surveys examine across several samples of customers of a major French multichannel retailer, including one sample of 1,478 respondents. This study delineates the scope of website and store images and defines reliable scales for evaluating each image dimension of the channels, including those totally missing from the literature. This measurement tool harnesses website and store characteristics that are very operational and easily actionable. This study demonstrates that a website can be described and analyzed along the same lines as a store, and shows the relevance of incorporating connections with other channels, particularly into the scope of website image.     

The indirect effect of online marketing capabilities on the international performance of e-commerce SMEs

International e-commerce is a strong global trend pushed by a tail wind of bolstering economic policies, changing customer behaviors, and improved logistics and technologies. This study investigates the reasons for performance variations among international e-commerce SMEs. Building on the capabilities perspective and market orientation literature, a research model is developed and tested with linear regression and mediation analysis on an effective sample of 99 Swedish SMEs which use e-commerce as an international sales channel. Our study shows that online marketing capabilities are necessary but not sufficient to increase performance among these companies. Our results show that marketing ambidexterity, reflected by both market-driven and market-driving approaches, is instrumental to leverage the effect of online marketing capabilities.     

Network development in international project marketing and the impact of external facilitation

This article reports on an experiment in external facilitation of international project marketing activity. The case involved a large, World Bank funded project in China aimed at upgrading grain storage and handling facilities. An organization was established in Australia to bring together and support efforts by Australian firms to win a share of this project. Network-building, at a number of levels both in China and Australia, emerged from the qualitative study as a critical factor in effective project marketing. External facilitation played a positive role in the network-building process.     

Market orientation in the context of SMEs: A conceptual framework

A number of studies in the marketing literature have examined the construct of market orientation (MO). These studies generally show a positive link between MO and organizational performance. This paper examines MO specifically in the context of small and medium sized enterprises (SMEs). An in-depth review of the extant literature is used to develop a conceptual framework by exploring the major antecedents of MO, the MO–Performance relationship, and the key mediators and environmental moderators of this relationship. This paper also examines several studies on SMEs with respect to various aspects of this framework and offers suggestions for future research in order to understand more thoroughly how MO influences SME performance.     

Speed of internationalization: Conceptualization,measurement and validation

To better manage and understand the speed at which firms internationalize, managers and scholars need an appropriate conceptualization and a reliable and valid measure of speed of internationalization. The literature, however, adopts a limited temporal perspective and usually conceptualizes and measures it as the time it takes the firm to start to internationalize. This unidimensional view neglects the central aspects of internationalization that create speed. Our purpose is, therefore, to propose a new, theory-driven – embedded in the main concepts of the original Uppsala model – and multidimensional conceptualization and operationalization. The main contribution is that we develop this conceptualization and measure.     

New entrepreneurial ventures in a globalized world: The role of market orientation

The present study examines the performance consequences of a market orientation for new entrepreneurial ventures in a globalized world. We show that market orientation indeed positively impacts the performance of new entrepreneurial ventures, regardless of their geographical setting. While market orientation turns out to be a general success factor in a globalized world, the strength of the performance relationship however is contingent to the national culture as one major differentiator between geographical settings. The effect turns out to be stronger in collectivist and high uncertainty avoidance cultures. Findings are derived based on large samples with German and Thai new entrepreneurial ventures. Partial least square is applied as the method of analysis.

Triad lessons: Generalizing results on high performance firms in five business-to-business markets

Significant differences are known to exist among organizations operating in different countries due to different national and organizational cultures, strategic orientations, and management styles. Less clear, however, is whether there are significant patterns of differences in how marketing-related factors drive performance in the most successful firms regardless of country. Building on a previous study of major Japanese firms [Deshpandé et al., 1993. Journal of Marketing 57, 22–27], an exploratory study compared samples of business-to-business relationships of Japanese, English, French, German, and US companies. We found the expected significant differences in organizational cultures, but found no country-specific slopes or intercepts in regressions relating factors such as innovativeness, organizational climate and culture, and market orientation to business performance. Successful firms appear to transcend differences in national culture and develop a common pattern of drivers of success which include primary focus on organizational innovativeness, a participative work climate, and an externally oriented organizational culture.     

Interfunctional dynamics and firm performance: A comparison between firms in Poland and the United States

This study compares between firms in the US mature market economy and in the Polish transitional economy. The study found that Poland's past as a planned economy may continue to hinder interdepartmental connectedness and act as an obstacle to firms in adopting a market orientation. According to the study, for Polish firms, there is less shared information and cooperation across departments, and less shared responsibility for departmental tasks, compared to US firms. The status of marketing in Poland remains that of a junior department, subordinate to influences from functional areas such as finance and accounting, which directed production in the former planned economy. The study supports the hypothesis that Polish firms have lower interdepartmental connectedness than US firms and finds strong support for the relationship between interdepartmental connectedness and firm performance.     

The overestimated role of strategic orientations for international performance in smaller firms

This article examines how market orientation (MO) and entrepreneurial orientation (EO) relate to international performance in small firms. Empirically, the article draws on survey data from 188 Swedish SMEs. Results show that strategic orientations have a very limited influence on international performance in these firms. Proactiveness and, to some extent, a market orientation proved positively associated with international performance, while innovativeness and risk taking show no such relationship. Our findings highlight the problems associated with using “traditional” MO and EO constructs in an SME setting and point to the need of developing more appropriate constructs tailored to this context. We also note that the MO construct was developed from a “causal view” of marketing, while successful small international firms rely more on effectuation logic. The article also contributes to the debate between the two dominant perspectives that address firms’ early internationalization processes: the process theory of internationalization and the international new venture perspective, where our results are in favor of the latter.

The role and management of product innovation in retailer assortments: evidence from the Italian FMCG market

This paper relocates the recent wave of internationalization in retailing in a much longer historical context. Utilizing a newly compiled database of all foreign entrants into British retailing since 1850, the paper reviews trends in overall entry patterns before considering the entry patterns in different retail trades. New empirical data on the branch counts of foreign entrants from 1850-1991 are presented. These data clearly indicate that what was new about the 1980s was not their number per se but the concentration of large numbers of relatively small entrants in clothes retailing. This analysis of the very long term developments of international retailing in Britain therefore concludes that any account of the upsurge in foreign entrants into British retailing in the 1980s needs to take the concurrent developments of high street demand for clothing more fully into account.     

Beyond explicit measures in marketing research: Methods,theoretical models,and applications

Whereas traditional self-report procedures and methods mainly tap into consumers explicit attitudes, the implicit cognition paradigm provide researchers and marketing practitioners with a unique tool to uncover consumer implicit attitudes, choices, decisions, and action tendencies. By means of the sheer extent and validated models and empirical studies in cognitive psychology, the application of implicit measures and techniques in marketing and consumer studies is in its infancy; thus, this special issue focuses on theories, tools and approaches for examining consumers unconscious attitude and sustainable consumption patterns. The objective of this special issue is to illustrate theoretical and methodological application of implicit consumer cognition paradigm in marketing and consumer studies. This special issue of Journal of Retailing and Consumer Services highlights the implicit cognition approach as a greater alternative in measuring consumer attitude and tendencies where scientist and marketers are impotent to capture.     

The impact of internal,external, and competitor factors on marketing strategy performance

ABSTRACT

Strategy formulation is commonly understood as the match between a firm’s internal resources and skills and its external environment. Marketing strategy performance is the function of a dynamic, interactive process incorporating internal firm resources, external environmental factors, and competitive actions. The study aims to assess the impact of competitor actions on marketing strategy performance. We develop a model that accommodates the effects of 29 variables (comprising internal marketing strategy variables, external environmental factors and competitors’ marketing mix variables) on business performance. We empirically test the model using simultaneous equation modelling of time-series data on UK car manufacturers collected from publically available resources and annual reports. The results show that external factors, in particular competitors’ marketing mix elements, have a greater influence on a company’s business performance than internal (marketing and non-marketing) strategy variables. Implications for marketing theory and management are discussed.