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A least squares approach to latent variables extraction in formative–reflective models

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  • Fattore, Marco
  • Pelagatti, Matteo
  • Vittadini, Giorgio

Abstract

A new least-squares based procedure for the extraction of latent variables in structural equation models with formative–reflective schemes is developed and illustrated. The procedure is a valuable alternative to PLS-PM and SEM since it is fully consistent with the causal structure of formative–reflective schemes and it extracts the factor scores without substantial identification or indeterminacy problems. Moreover, the new methodology involves the optimization of an explicit and simple to interpret objective function, provides a natural way to check the correct specification of the model and is computationally light. The superiority of the new algorithm over its competitors is proved through examples involving both simulated and real data.

Suggested Citation

  • Fattore, Marco & Pelagatti, Matteo & Vittadini, Giorgio, 2018. "A least squares approach to latent variables extraction in formative–reflective models," Computational Statistics & Data Analysis, Elsevier, vol. 120(C), pages 84-97.
    • Handle: RePEc:eee:csdana:v:120:y:2018:i:c:p:84-97
    DOI: 10.1016/j.csda.2017.11.006
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    References listed on IDEAS

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    1. Diamantopoulos, Adamantios & Riefler, Petra & Roth, Katharina P., 2008. "Advancing formative measurement models," Journal of Business Research, Elsevier, vol. 61(12), pages 1203-1218, December.
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    4. Ruiz, David Martín & Gremler, Dwayne D. & Washburn, Judith H. & Carrión, Gabriel Cepeda, 2008. "Service value revisited: Specifying a higher-order, formative measure," Journal of Business Research, Elsevier, vol. 61(12), pages 1278-1291, December.
    5. Bruhn, Manfred & Georgi, Dominik & Hadwich, Karsten, 2008. "Customer equity management as formative second-order construct," Journal of Business Research, Elsevier, vol. 61(12), pages 1292-1301, December.
    6. Vittadini, Giorgio & Minotti, Simona C. & Fattore, Marco & Lovaglio, Pietro G., 2007. "On the relationships among latent variables and residuals in PLS path modeling: The formative-reflective scheme," Computational Statistics & Data Analysis, Elsevier, vol. 51(12), pages 5828-5846, August.
    7. Heungsun Hwang & Yoshio Takane, 2004. "Generalized structured component analysis," Psychometrika, Springer;The Psychometric Society, vol. 69(1), pages 81-99, March.
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    Cited by:

    1. Laura Grassini & Alessandro Magrini & Enrico Conti, 2023. "Formative-reflective scheme for the assessment of tourism destination competitiveness: an analysis of Italian municipalities," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(4), pages 3523-3548, August.

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