Estimating hierarchical constructs using partial least squares: The case of second order composites of factors
until further notice
SourceIndustrial Management & Data Systems, 117, 3, (2017), pp. 459-477
Article / Letter to editor
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Industrial Management & Data Systems
SubjectInstitute for Management Research
PURPOSE - Many important constructs of business and social sciences are conceptualized as composites of common factors, i.e. as second-order constructs composed of reflectively measured first-order constructs. Current approaches to model this type of second-order construct provide inconsistent estimates and lack a model test that helps assess the existence and/or usefulness of a second-order construct. The purpose of this paper is to present a novel three-stage approach to model, estimate, and test second-order constructs composed of reflectively measured first-order constructs. DESIGN/METHODOLOGY/APPROACH - The authors compare the efficacy of the proposed three-stage approach with that of the dominant extant approaches, i.e. the repeated indicator approach, the two-stage approach, and the hybrid approach by means of simulated data whose underlying population model is known. Moreover, the authors apply the three-stage approach to a real research setting in business research. FINDINGS - The study based on simulated data illustrates that the three-stage approach is Fisher-consistent, whereas the dominant extant approaches are not. The study based on real data shows that the three-stage approach is meaningfully applicable in typical research settings of business research. Its results can differ substantially from those of the extant approaches. RESEARCH LIMITATIONS/IMPLICATIONS - Analysts aiming at modeling composites of common factors should apply the proposed procedure in order to test the existence and/or usefulness of a second-order construct and to obtain consistent estimates. ORIGINALITY/VALUE - The three-stage approach is the only consistent approach for modeling, estimating, and testing composite second-order constructs made up of reflectively measured first-order constructs.
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