STRUCTURAL EQUATION MODELLING

AND UNDERSTANDING THE BASICS

OF MEDIATION, MODERATION &
CONDITIONAL PROCESS ANALYSIS

Dr. Louise M. Hassan

Reader in Managerial Studies
Bangor University
Bangor PhD workshop March 2014
WHAT ARE WE COVERING
TODAY?
 Structural equation modelling (SEM)
 Potential uses
 Strengths and weaknesses of this approach
 Demonstrate use in practice
 Mediation and moderation
 Focus will be on mediation
 Moderation and moving to conditional process
analysis
WHAT MIGHT BE THE MODEL
FOR THE COSTA DATA?

In-store aroma
Pleasure

Satisfaction In-store music

SEM MODEL IN LINE WITH
PAST RESEARCH & THEORY
e8 e9 e10 e11
1 1 1 1
1
e1 m_nov 1
pleas_1 pleas_2 pleas_3 pleas_4
1
1
e2 m_fant Music
.23 **
1
e3 m_int Pleasure 1
D1
.05 NS r-sq=.27

.58 ***
.39 *** D2
1
1
e4 a_plea .39 ***
1
1
Satisfaction
e5 a_delic r-sq=.55
Aroma .24 ***
1 1
e6 a_fan

1 sat_2 sat_1
e7 a_invit
1 1

e13 e12

Overall fit of the SEM is good with χ2(59) = 147.72; p<.01; CFI = .96, TLI = .95, RMSEA = .074
MEDIATION, MODERATION DEFINED

Mediation
A – antecedent variable
Me – mediating variable
Me
D –dependent variable
A D

Mo
A – antecedent variable
Mo – moderating variable
A D D –dependent variable

Moderation
RESULTS OF SEM
 Music has a significant impact on
 Pleasure,
 but (not directly) on Satisfaction.

 Aroma has a significant impact on

 Pleasure, and
 directly on Satisfaction.
 TEMPTING (HEADLINE)
CONCLUSIONS
 The effect of in-store Music on customer Satisfaction is
 fully mediated by perceived Pleasure.

 The effect of in-store Aroma on customer Satisfaction is

 either partially mediated by perceived Pleasure
 or not mediated at all by perceived Pleasure.

Warning!!! Both statements need clarification.

“THE EFFECT OF IN-STORE MUSIC ON CUSTOMER
SATISFACTION IS FULLY MEDIATED BY PERCEIVED
PLEASURE.”
 This statement does not allow us to conclude if Music
does (or does not) have any significant (indirect)
impact on Satisfaction. If there is no significant
indirect effect, then no mediation is present!

 It just might be possible that providing in-store music

(however much it might contribute towards giving
pleasure to customers) does not have any influence
on overall customer satisfaction with the coffee
store!
 Let’s look at results again.
WHAT HAVE WE GOT!
 Music has a significant direct effect on Pleasure

 Pleasure has a significant direct effect on Satisfaction

 BUT!!! Does Music have a significant indirect effect on

Satisfaction??? (Still to be answered)
 BARON & KENNY 4-STEP PROCEDURE
(ADAPTED FROM HTTP://DAVIDAKENNY.NET/CM/MEDIATE.HTM )
 Step 1: Show that the explanatory/independent variable
is correlated with the outcome. Use Y as the criterion
variable in a regression equation and X as a predictor
(estimate and test path c). This step establishes that
there is an effect that may be mediated.

D2
1
e1 m_nov 1
1

1 Music c Satisfaction
e2 m_fant
(X) (Y)
1
e3 m_int 1

sat_2 sat_1

1 1

e13 e12
 BARON & KENNY 4-STEP PROCEDURE
(ADAPTED FROM HTTP://DAVIDAKENNY.NET/CM/MEDIATE.HTM)
 Step 2: Show that the initial variable is correlated with
the mediator. Use M as the criterion variable in the
regression equation and X as a predictor (estimate and
test significance of path a). This step essentially involves
treating the mediator as if it were an outcome variable.
D
1
e1 m_nov 1
1

1 Music a Pleasure
e2 m_fant
(X) (M)
1 1
e3 m_int

pleas_1 pleas_2 pleas_3 pleas_4

1 1 1 1

e4 e5 e6 e7
 BARON & KENNY 4-STEP PROCEDURE
(ADAPTED FROM HTTP://DAVIDAKENNY.NET/CM/MEDIATE.HTM)

 Step 3:
Show that the mediator M affects the outcome variable Y.
Use Y as the criterion variable in a regression equation and X
and M as predictors (estimate and test the significance of
path b).
It is not sufficient just to correlate the mediator M with the
outcome Y; the mediator M and the outcome Y may be
correlated because they are both caused by the
explanatory variable X.
Thus, the explanatory variable X must be controlled in
establishing the effect of the mediator M on the outcome Y.
 e3 e2 e1 e8 e9
1 1
1 1 1

sat_1 sat_2
m_int m_fant m_nov
1
1

Music Satisfaction
(X) (Y)
1

b
Pleasure D
(M)
1

pleas_1 pleas_2 pleas_3 pleas_4

1 1 1 1

e4 e5 e6 e7
 BARON & KENNY 4-STEP PROCEDURE
(TAKEN FROM HTTP://DAVIDAKENNY.NET/CM/MEDIATE.HTM)
 Step 4: To establish that M completely mediates the
X-Y relationship, the effect of X on Y controlling for
M (path c') should be zero. The effects in both Steps
3 and 4 are estimated in the same equation.
e3 e2 e1 e8 e9
1 1
1 1 1

sat_1 sat_2
m_int m_fant m_nov
1
1

Music c' Satisfaction

(X) (Y)
a 1

b
1 Pleasure D2
D1
(M)
1

pleas_1 pleas_2 pleas_3 pleas_4

1 1 1 1

e4 e5 e6 e7
CONCLUSIONS TO BE DRAWN
 If all four of the Baron & Kenny steps are met, then
the data are consistent with the hypothesis that
variable M fully/completely mediates the X-Y
relationship, and

 If the first three steps are met but the Step 4 is

not, then partial mediation is indicated. 

 Meeting these steps does not, however,

conclusively establish that mediation has occurred
because there are other (perhaps less plausible)
models that are consistent with the data. 
RECENT OBSERVATIONS
1. In the opinion of many analysts, Step 1 (X  Y)
is not required if full mediation is expected.
2. Some have argued that Step 3 should be
modified by not controlling for the explanatory
variable X.  Their rationale is that if there is
full mediation, there would be no need to
control for the initial variable.  
3. Also note: Step 4 does not have to be met
unless the expectation is for full mediation.
 RECENT OBSERVATIONS
 A more rigorous method to test mediation was
proposed by Shrout and Bolger (2002).

 This method employs bootstrapping techniques

to test the significance of the indirect effects
and is considered by many authors, including
Kenny (2009), as a more appropriate method for
evaluating mediation effects when using SEM.

 According to Shrout and Bolger (2002) if the 95%

confidence interval (CI) for the estimate of the
indirect effect contains zero then no mediation
is evidenced.
BOOTSTRAPPING
 Bootstrapping allows the estimation of standard
error even when assumptions of normality do not
hold true.

 Bootstrapping is a computational method based on

re-sampling with replacement of the data.

 The principle is that by taking a large number of

random samples from the dataset, information on
the variability of parameter estimates is obtained
based on the samples.
ESTIMATES OF DIRECT & INDIRECT
EFFECTS
Amos
provides
estimates
of direct
& indirect
effects of
the SEM
model.
CONFIDENCE INTERVAL (CI)
To obtain CI
for direct &
indirect
effects,
bootstrapping
is required.

Example
specified 1000
samples giving
95% CI .
AMOS OUTPUT ON BOOTSTRAPPING
95% CI for Estimates of Indirect Effects
indirect effects Aroma Music
(of Aroma & Satisfaction .319 .222

Music) show
both Indirect Effects - Lower Bounds
explanatory Aroma Music
variables exert Satisfaction .186 .081
a significant
indirect effect
on Satisfaction. Indirect Effects – Upper Bounds
Aroma Music
Satisfaction .467 .392
TEMPTING (HEADLINE) CONCLUSIONS
(RE-VISITED) – NOW FIRMER HEADLINES
 The effect of in-store Music on customer
Satisfaction is
 fully mediated by perceived Pleasure. (Yes)

 The effect of in-store Aroma on customer

Satisfaction is
 either partially mediated by perceived Pleasure (Yes)
 or not mediated at all by perceived Pleasure (No)
 LIFE THOUGH IS A LOT MORE
COMPLICATED THAN THAT…..

Walsh, G., Shiu, E., Hassan, L.M., Michaelidou, N., and Beatty, S.E. (2011), “How Emotions Mediate the Link between
Store-Environmental Cues, Store-Choice Criteria, and Marketing Outcomes,” Journal of Business Research, 64 (7), 737-744.
 SERIAL MEDIATION

 Hayes Process utility

 http://www.afhayes.com/public/templates.pdf
 Allows you to examine up to 4 mediators and
provides the paths were mediation does and
doesn’t occur
In-store
aroma
Pleasure Satisfaction Loyalty
In-store
music
MODERATING EFFECTS (TWO
APPROACHES)
 Multi-group analysis for categorical moderators
 Special case via median split (to convert scale
variables to categorical variable, e.g., personality
traits such as extroverts Vs introverts)

 Calculating interaction terms with

continuous/scale variables
 Many ways to do this
 Best approach uses residual centering but this approach
is new and not well used in the literature
 Traditional approach is by centering and multiplying
items
MULTI-GROUP ANALYSIS
 Example: Costa Coffee with gender differences

Regression Weights: Males (Females)

Estimate S.E. C.R. P

.011 .146 .074 .941

Pleasure <--- Music
(.410) (.113) (3.643) (***)
.341 .125 2.721 .007
Pleasure <--- Aroma
(.407) (.087) (4.667) (***)
.761 .183 4.168 ***
Satisfaction <--- Pleasure
(.787) (.094) (8.370) (***)

.151 .171 .883 .377

Satisfaction <--- Music
(.048) (.114) (.419) (.675)

.091 .155 .583 .560

Satisfaction <--- Aroma
(.423) (.100) (4.248) (***)
MULTI-GROUP ANALYSIS
(CHI-SQ DIFFERENCE TEST)
 Statistical testing of whole model

 Statistical testing of specific structural path

 Read Hair et al. 7th ed (pp 770-772).

MODERATION VIA PROCESS

Gender

Music Pleasure
Gend 0 = male, 1 = female
MEDIATED MODERATION AND MODERATED
MEDIATION (CONDITIONAL PROCESS ANALYSIS)
 See the work of Kristopher J. Preacher
 http://www.quantpsy.org/medn.htm See
 In addition to Hayes Preacher, K.
J., Rucker, D.
D., & Hayes,
A. F. (2007).
Addressing
moderated
mediation
hypotheses:
Theory,
methods, and
prescriptions.
Multivariate
Behavioral
Research, 42,
185-227.
EXAMPLE OF MODERATED
MEDIATION (MODEL 74 FROM PROCESS)

Intention Behaviour
Planning

Intention

Hassan, Shiu and Shaw (Forthcoming) Journal of Business Ethics

ANOTHER EXAMPLE
Overall the results tell us that the
mediation is moderated.

That is, that pleasure only mediates

the effect of music on satisfaction
for females and that there is no
mediation for males.

Gender

Music Pleasure Satisfaction

WHEN TO USE SEM AND WHEN
TO USE REGRESSION
 Depends on model complexity
 Remember that both regression and SEM can
be used to analyse experimental data
 Remember that PROCESS is new and so need
to look at forthcoming articles
 But
 Consider assumptions
 Do you really want to assume that your variables are
measured without error?
 Do you really want to use averages instead of a latent
variable?
KEY REFERENCES YOU SHOULD
BECOME FAMILIAR WITH….
 Baron RM, Kenny DA. The Moderator-Mediator Variable
Distinction in Social Psychological Research: Conceptual,
Strategic, and Statistical Considerations. J Pers and Soc Psych
1986;51:1173-182.
 Fornell C, Larcker DF. Evaluating Structural Equation Models
with Unobservable Variables and Measurement Error. J Mark
Res 1981;18:39-50.
 Strout PE, Bolger N. Mediation in Experimental and
Nonexperiemental Studies: New Procedures and
Recommendations. Psych Methods, 2002; 7(4):422-445.
 Hair JF, Jr, Anderson RE, Tatham RL, Black WC. Multivariate
Data Analysis. 5th ed. Englewood Cliffs, NJ: Prentice
Hall;1998.
 Hu L, Bentler PM. Cutoff Criteria for Fit Indexes in Covariance
Structure Analysis: Conventional Criteria versus New
Alternatives. Struct Equat Mod 1999;6:1-55.