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The Use And Misuse Of Structural Equation Modeling In Management Research

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  • Nebojsa S. Davcik

Abstract

The research practice in management research is dominantly based on structural equation modeling, but almost exclusively, and often misguidedly, on covariance-based SEM. We adumbrate theoretical foundations and guidance for the two SEM streams: covariance-based, also known as LISREL, covariance structure analysis, latent variable analysis, etc.; and variance-based SEM, also known as a component-based SEM, PLS, etc. Our conceptual framework discusses the two streams by analysis of theory, measurement model specification, sample and goodness-of-fit. We question the usefulness of Cronbach’s alpha research paradigm and discuss alternatives that are well-established in social science, but not well-known in the management research community. We conclude with discussion of some open questions in management research practice that remain under-investigated and unutilized.

Suggested Citation

  • Nebojsa S. Davcik, 2013. "The Use And Misuse Of Structural Equation Modeling In Management Research," Working Papers Series 2 13-07, ISCTE-IUL, Business Research Unit (BRU-IUL).
  • Handle: RePEc:isc:iscwp2:bruwp1307
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    File URL: http://bru-unide.iscte.pt/RePEc/pdfs/13-07.pdf
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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.
    2. Heungsun Hwang & Moon-Ho Ho & Jonathan Lee, 2010. "Generalized Structured Component Analysis with Latent Interactions," Psychometrika, Springer;The Psychometric Society, vol. 75(2), pages 228-242, June.
    3. P. M. Bentler & Chih-Ping Chou, 1987. "Practical Issues in Structural Modeling," Sociological Methods & Research, , vol. 16(1), pages 78-117, August.
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    Cited by:

    1. Fauziah Mahat & Noor Azman Ali, 2015. "The Roles of Risk Governance on Islamic Banking Systems," Proceedings of International Academic Conferences 2705187, International Institute of Social and Economic Sciences.
    2. Marques, Catarina & Reis, Elizabeth, 2015. "How to deal with heterogeneity among tourism constructs?," Annals of Tourism Research, Elsevier, vol. 52(C), pages 172-174.

    More about this item

    Keywords

    Structural equation modeling; covariance- and variance-based SEM; formative and reflective indicators; LISREL; PLS;

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • M0 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General

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