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You are on page 1of 41

using Smartpls

Dr Tahir Iqbal

tahirse6393@gmail.com

03009469363

If the result confirms the

hypothesis,

then youve made a

measurement.

If the result is contrary to

the hypothesis,

then youve made a

discovery

Nobel prize winner

Structural Equations Modeling

What comes to mind?

CB-SEM

LIS R EL AMO S ?

PLS-SE

M

Family Tree of SEM

Multiple samples,

Is the difference multiple variables, over

between T -te s t

A N O V A time, etc.

samples on a M u lti-w a y

variable A N O V A R e p e a te d

M ea su re

significant? D e s ig n s

G ro w th

C u rv e

A n a ly s is

L a te n t

G ro w th

Is the correlation M u ltip le P a th

S tru c tu ra l C u rv e

E q u a t io n A n a ly s is

between B iv a r ia te

C o r r e la tio n

R e g r e s s io n A n a ly s is

M o d e lin g

different

variables

significant? C o n fir m a to r y

F a c to r

A n a ly s is

F a c to r

A n a ly s is

Multiple variables,

overall model,

E x p lo r a to r y

F a c to r

measurement

A n a ly s is model, etc.

Multivariate Methods

Multivariate Measurement

Measurement = the process of assigning numbers to a variable/construct

based on a set of rules that are used to assign the numbers to the

variable in a way that accurately represents the variable.

them indirectly with proxy variables. If the concept is restaurant

satisfaction, for example, then the several proxy variables that could be

used to measure this might be:

2. The speed of service met my expectations.

3. The wait staff was very knowledgeable about the menu items.

4. The background music in the restaurant was pleasant.

5. The meal was a good value compared to the price.

indirectly measure a concept, as in the restaurant satisfaction example

above. It also enables researchers to account for the error in data.

Structural Equation Modeling

objective is to reproduce the theoretical

covariance matrix, without focusing on

explained variance

objective is to maximize the explained

variance of the endogenous latent

constructs (dependent variables)

CB-SEM evaluation focuses on goodness of

fit = minimization of the difference

between the observed covariance matrix

and the estimated covariance matrix.

prior theory is strong.

Assumes normality of data distribution,

homoscedasticity, large sample size, etc.

Only reliable and valid variance is useful for

testing causal relationships.

A full information approach which means small

changes in model specification can result in

substantial changes in model fit.

PLS-SEM objective is to maximize the

explained variance of the endogenous

latent constructs (dependent variables).

Research objective: theory development and

prediction.

Normality of data distribution not assumed.

Can be used with fewer indicator variables (1 or 2)

per construct.

Models can include a larger number of indicator

variables (CB-SEM difficult with 50+ items).

Preferred alternative with formative constructs.

Assumes all measured variance (including error) is

useful for explanation/prediction of causal

relationships.

Structural Equation Modeling

Rules for Causal Diagrams

Exogenous vs. Endogenous Variables

Residual Variables

Observed Latent Residual, uncorrelated

Structural Equation Modeling

Measurement Models

Structural Equation Modeling

Structural Models

Structural Equation Modeling

Simultaneous Models

CB-SEM Model

Exogenous Latent Variable

/Construct

Verbal

Ability

s Variable

1 1 1 1 General

Intelligence

d1 d2 d3 d4 1

y1 y2 y3 y4 Indicator

1 1 1 1 s

Exogenous Latent Quantitative

Ability

Variable e1 e2 e3 e4

x5 x6 x7 x8 Indicator

1 1 1 1 s

d5 d6 d7 d8

PLS Path Model

Latent Construct

Rules of Thumb: PLS-SEM or CB-SEM?

key driver constructs.

Formative constructs are easy to use in the structural

model.

The structural model is complex (many constructs and

many indicators).

The sample size is small and/or the data is not-normally

distributed, or exhibits heteroskedasticity.

The plan is to use latent variable scores in subsequent

analyses.

Rules of Thumb: PLS-SEM or CB-SEM

The goal is theory testing, theory confirmation, or the

comparison of alternative theories.

Error terms require additional specification, such as the

co variation.

Structural model has non-recursive relationships.

Research requires a global goodness of fit criterion.

Data Characteristics PLS-SEM

Model Characteristics PLS-SEM

Algorithm Properties PLS-SEM

Model Evaluation Issues PLS-SEM

Reflective (Scale) Versus Formative (Index)

Operationalization of Constructs

A central research question in social science research, particularly

marketing and MIS, focuses on the operationalization of complex

constructs:

the latent variable/construct measured by them?

Indicator 1 Indicator 2 Indicator 3 Indicator 1 Indicator 2 Indicator 3

Construct

? Construct

directly cause changes in the indicators causes changes in

assigned indicators the latent variable

Basic Difference Between Reflective and Formative

Measurement Approaches

therefore the removal of an item does not change the essential nature of

the underlying construct), with formative indicators omitting an indicator

is omitting a part of the construct.

generally minimizes the overlap between

complementary indicators

Construct

domain

Construct

domain

focuses on maximizing the overlap

between interchangeable indicators

Reflective versus Formative

R1. I eat healthy food. F1. I have a balanced diet

R2. I do not each much F2. I exercise regularly

junk food. F3. I get sufficient sleep

R3. I have a balanced each night

diet. e3

Diet Health

R R R

F1 F2 F3

1 2 3

e1 e2 e3

EDM 643 26

Diet (Reflective) Health (Formative)

e3

Diet Health

R R R

F1 F2 F3

1 2 3

e1 e2 e3

construct to measure measure to construct

Measures expected to be No reason to expect the

correlated measures are correlated

Indicators are Indicators are not

interchangeable interchangeable

EDM 643 27

*From Jarvis et al 2003

Exercise: Satisfaction in Hotels as Formative and

Reflective Operationalized Construct

The rooms are clean

are good offerings are good

account, I am satisfied I appreciate this hotel

with this hotel

The hotel is low-priced

are friendly with Hotels

I am looking forward to

The rooms are quiet staying overnight in

this hotel

this hotel good good

28

29

30 Latent Variables and Structural Equation Modeling

Systematic Process for applying PLS-SEM

31

Systematic Process for applying PLS-SEM

32

Systematic Process for applying PLS-SEM

33

THUMB RULE REFLECTIVE CONSTRUCT ASSESSMENT

34

THUMB RULE REFLECTIVE CONSTRUCT ASSESSMENT

35

THUMB RULE FORMATIVE CONSTRUCT ASSESSMENT

36

Causality

basis

Education Success

in Life

Unemp- Windows of

loyment No. of Opportunity

Rate Crimes for Crime

Statistical Modeling

A Statistical Model DOES NOT necessarily

have theoretical basis It may be

interpreted as either make sense

or nonsense

Weight

Heart

Disease

Income

Smoking

No. of No. of

Road Newspaper

Accidents Readers

Types of Significant Path

Indirect Effect

X Y

Partial Mediation

X Y

Full Mediation

X Y

39

More complex mediation

structures

Chain Model

X M1 M2 M3 Y

M1

X M2 Y

M3

Parallel Model

40

Mediation Table

Mediation

Direct Beta Direct Beta

Hypothesis Indirect Beta type

w/o Med w/Med

observed

AB-C

Moderator vs. Mediator

A M B

K E

C

magnitude of the effect an IV has on a DV

M

K E

42

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