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.     

Proportional structural effects of formative indicators

Formative constructs must influence two or more distinct outcome variables for meaningful tests of the formative conceptualization. Because the construct mediates the effects of its indicators, the indicators must have effects on the outcomes that are proportional to their effects on the formative construct itself. This constraint has important implications for developing and testing formative models. This study demonstrates the existence of the constraint, shows that researchers must consider proportionality as a criterion for evaluating the formative conceptualization, provides examples of indicators having different effects and interpretations depending on the outcome variables used, discusses the selection of outcomes to provide rigorous rather than trivial tests of the formative conceptualization, and contends that the formative nature of constructs cannot be justified in isolation from the consideration of outcome variables. In addition, the study demonstrates the importance of considering how the scaling of the formative construct influences the significance of the effects in the model.     

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.     

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.     

A Primer on Moderated Mediation Analysis: Exploring Logistics Involvement in New Product Development

Theorizing and empirically testing moderated mediation hypotheses allows logistics and supply chain management (L&SCM) scholars to extend the boundaries of our current understanding by examining how, when, and why relationships arise between constructs central to our theories. However, while moderated mediation analyses can enrich theory in L&SCM, they are few in number, likely due to the complexities associated with their execution. In this article, we provide a didactic treatment for executing moderated mediation analysis. We do so using primary data regarding logistics involvement in new product development. In the hopes of spurring greater application of moderated mediation in L&SCM, we devise a series of recommendations that guide scholars through the process of conducting such analyses. These recommendations extend prior treatments by explaining how to address challenges associated with devising theories to undergird moderated mediation hypotheses, measuring constructs using multiple indicators, providing guidance for detecting influential cases that can unduly affect results, and integrating what results should be reported.     

Institutional entrepreneurs' social mobility in organizational fields

This study examines how institutional entrepreneurs with marginalized social positions use institutional change to become more influential members of organizational fields. We analyze how the Rainforest Action Network (RAN) used rhetoric to garner more influence as it altered a key sourcing practice in the retail home-improvement field. Our findings indicate that RAN relied on three rhetorical practices, comprising an encompassing process, to cultivate positive associations between the new sourcing practices and its social position in the field. Overall, by specifying a marginalized entrepreneur's methods for leveraging one type of change to enact another, we enhance theory at the intersection of institutional entrepreneurship, institutional work, and rhetoric.     

Application of extended theory of planned behavior model to ecological behavior intentions in the food and beverage service industry

ABSTRACT

This study examined the relationships between environmental concern, the three main constructs of theory of planned behavior (TPB), two extended constructs (psychological ownership of the company and sense of responsibility) and employee behavioral intention to implement environmental measures. A questionnaire designed for restaurant employees was used to measure identified indicators. Structural equation modeling was chosen for hypothesis testing. Our results indicated that the three TPB constructs and one psychological trait (sense of responsibility) mediated the relationship between environmental concern and behavioral intention. Employee psychological ownership of a company was verified to exert a positive effect on employee behavioral intention. However, the findings cannot be applied to F&B settings in general since the study was restricted to Chinese restaurants identified.     

Seeing through a Glass Onion: broadening and deepening formative research in social marketing through a mixed methods approach

ABSTRACT

The purpose of formative research in social marketing is to understand the target audience to generate consumer insight, which informs the planning, development and initial implementation of social marketing programmes. Focus groups, interviews or surveys, all of which are self-report methods, are the most commonly reported methods employed in formative research. Reliance on a relatively narrow range of methods may constrain understanding and insight gained during formative research. This paper challenges social marketers to mix methods or use multiple methods and research perspectives to generate a broader understanding of the consumer and the context in which they behave. A case study is used to demonstrate how mixed methods were used in a formative research study to inform the development of a social marketing programme designed to change eating behaviour. Challenges of mixed methods are detailed along with recommendations for future research.     

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.     

Constructing an index for brand equity: a hospital example

If two hospitals are providing identical services in all respects, except for the brand name, why are customers willing to pay more for one hospital than the other? That is, the brand name is not just a name, but a name that contains value (brand equity). Brand equity is the value that the brand name endows to the product, such that consumers are willing to pay a premium price for products with the particular brand name. Accordingly, a company needs to manage its brand carefully so that its brand equity does not depreciate. Although measuring brand equity is important, managers have no brand equity index that is psychometrically robust and parsimonious enough for practice. Indeed, index construction is quite different from conventional scale development. Moreover, researchers might still be unaware of the potential appropriateness of formative indicators for operationalizing particular constructs. Towards this end, drawing on the brand equity literature and following the index construction procedure, this study creates a brand equity index for a hospital. The results reveal a parsimonious five-indicator brand equity index that can adequately capture the full domain of brand equity. This study also illustrates the differences between index construction and scale development.     

W(h)ither Ecology? The Triple Bottom Line, the Global Reporting Initiative, and Corporate Sustainability Reporting

This paper offers a critique of sustainability reporting and, in particular, a critique of the modern disconnect between the practice of sustainability reporting and what we consider to be the urgent issue of our era: sustaining the life-supporting ecological systems on which humanity and other species depend. Tracing the history of such reporting developments, we identify and isolate the concept of the ‘triple bottom line’ (TBL) as a core and dominant idea that continues to pervade business reporting, and business engagement with sustainability. Incorporating an entity’s economic, environmental and social performance indicators into its management and reporting processes, we argue, has become synonymous with corporate sustainability; in the process, concern for ecology has become sidelined. Moreover, this process has become reinforced and institutionalised through SustainAbility’s biennial benchmarking reports, KPMG’s triennial surveys of practice, initiatives by the accountancy profession and, particularly, the Global Reporting Initiative (GRI)’s sustainability reporting guidelines. We argue that the TBL and the GRI are insufficient conditions for organizations contributing to the sustaining of the Earth’s ecology. Paradoxically, they may reinforce business-as-usual and greater levels of un-sustainability.     

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.     

Food-leftover sharing intentions of consumers: An extension of the theory of planned behavior

The study is grounded on the premise that the food-leftover sharing practice can simultaneously contribute to resolving the problems of food shortage and food wastage. The primary aim of the study was to identify the factors influencing consumer intentions to share food leftovers. The study was conducted in four stages. First, a comprehensive literature analysis was done to identify the relevant factors and underlying relationships among them. Second, a research instrument was designed, and pretesting was conducted to check the appropriateness of the research instrument with the study context. Third, a pilot study was performed on the 194 respondents to check the dimensionality of the study scales. Four, the final data was collected and analyzed from a sample of 331 (collected through offline and online modes) using structural equation modeling in AMOS 24. The pilot and final study data were collected from New Delhi (An Indian metropolitan city). The study findings suggest that the TPB constructs i.e. subjective norms, attitude, and perceived behavior control influence consumer intentions to share food leftovers. Additionally, religiosity, moral obligation, and environmental concern were observed to be the predictors of attitude toward the practice of food-leftover sharing. This study offers food leftover sharing as a solution to food waste generation and hence, aligned with the sustainable development goals (SDG -12) i.e., responsible consumption and production.     

Strategic Leadership of Corporate Sustainability

Strategic leadership and corporate sustainability have recently come together in conspicuously explicit fashion through the emergence of top management team (TMT) positions with dedicated corporate sustainability responsibilities. These TMT positions, commonly referred to as “Chief Sustainability Officers,” have found their way into the upper echelons of many of the world’s largest corporations alongside more traditional TMT positions including the CEO and CFO. We explore this phenomenon and consider the following two questions: Why are corporate sustainability positions being installed to the TMT? What effects do corporate sustainability TMT positions have at their organizations? We consider these questions through strategic leadership and neoinstitutional theoretical frameworks. Through the latter, we also engage with Weberian considerations of bureaucracy. We find that the reasons why corporate sustainability TMT positions are installed can be in response to a crisis at the corporation for which its legitimacy is challenged. We also find the corporate sustainability TMT position can be installed proactively in an effort to realize external opportunities that may have otherwise gone unrealized without concerted attention and coordination afforded by a strategic level position. Regarding effects, we determine the position can relate to the establishment of bureaucratic structures dedicated to corporate sustainability within the corporation through which formalized processes and key performance indicators to drive corporate sustainability performances are established. In the face of our finding that many corporate sustainability TMT positions are being removed despite having only relatively recently been introduced to their respective TMTs, we find that the successful implementation of bureaucratic machinery can help considerations to sustainability extend beyond the tenure of a corporate sustainability position within the TMT.     

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.     

Practical general equilibrium estimation of resource pulls under trade liberalization

This paper discusses the application of a model similar to the one developed in Leif Johansen's Multi-sectoral study of economic growth (1964) to the problem of determining general equilibrium responses of the economy to changes in commercial policy. This method amounts essentially to specifying a log-linear approximation to the general equilibrium solution for the economy, and solving the resulting linear equations for changes in endogenous variables as functions of exogenous variable changes. For a 35-sector model of the Chilean economy with labor as the only variable factor of production (to avoid the problem of overdetermination of many commodity price and output shifts when only two factors are considered in constant returns production functions), it is found that (i) the specification of the way in which intermediate inputs enter the production function is numerically important in determining output responses to tariff changes, detracting from the credibility of fixed coefficient effective rate of protection calculations if variable intermediate input coefficients are the rule (as appears likely empirically); (ii) exchange rate elasticities with respect to individual tariff changes are fairly large, so that the usual partial equilibrium assumption of exchange rate insensitivity to ‘small’ tariff revisions is not valid; (iii) employment effects of different tariff revisions are highly variable and in some cases substantial.     

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.     

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.     

Formative versus reflective measurement models: Two applications of formative measurement

This paper presents a framework that helps researchers to design and validate both formative and reflective measurement models. The framework draws from the existing literature and includes both theoretical and empirical considerations. Two important examples, one from international business and one from marketing, illustrate the use of the framework. Both examples concern constructs that are fundamental to theory-building in these disciplines, and constructs that most scholars measure reflectively. In contrast, applying the framework suggests that a formative measurement model may be more appropriate. These results reinforce the need for all researchers to justify, both theoretically and empirically, their choice of measurement model. Use of an incorrect measurement model undermines the content validity of constructs, misrepresents the structural relationships between them, and ultimately lowers the usefulness of management theories for business researchers and practitioners. The main contribution of this paper is to question the unthinking assumption of reflective measurement seen in much of the business literature.     

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.