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Testing The Discriminant Validity and Heterotrait–Monotrait Ratio of Correlation (HTMT): A Case in Indonesian SMEs

In: Macroeconomic Risk and Growth in the Southeast Asian Countries: Insight from Indonesia

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  • Yong Dirgiatmo

Abstract

In Structural Equation Modelling (SEM) cases, a number of steps to ensure that the measurement of the latent constructs, variables, and indicators have been appropriate, reliable, and meet the rules of quantitative research that must be passed by researchers. One of them is the criteria for determining the presence (or not) of a discriminant validity violation, which is still a fierce debate among researchers today. The last recommended method is the Heterotrait–Monotrait ratio of correlation (HTMT) which seeks to revise the previously existing discriminant validity criteria such as the Fornell–Larcker and Cross-loadings criteria. This chapter discusses the implementation of HTMT in the case of manufacturing small and medium enterprises (SMEs) in Indonesia with the aim of providing an illustration of how the HTMT is capable of detecting the violation of discriminant validity and the solutions that can be carried out following the recommendations given by the originators.

Suggested Citation

  • Yong Dirgiatmo, 2023. "Testing The Discriminant Validity and Heterotrait–Monotrait Ratio of Correlation (HTMT): A Case in Indonesian SMEs," International Symposia in Economic Theory and Econometrics, in: Macroeconomic Risk and Growth in the Southeast Asian Countries: Insight from Indonesia, volume 33, pages 157-170, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:isetez:s1571-03862023000033a011
    DOI: 10.1108/S1571-03862023000033A011
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    More about this item

    Keywords

    Small and medium enterprises; SMEs; structural equation modelling; SEM; discriminant validity; Fornell–Larcker criterion; cross-loadings criterion; heterotrait–monotrait ratio of correlation; HTMT; C1; C5; C52;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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