The Measurement of Endogenous Higher-Order Formative Composite Variables in PLS-SEM: An Empirical Application from CRM System Development
In recent methodological articles related to structural equation modeling (SEM), the question of how to measure endogenous formative variables has been raised as an urgent, unresolved issue. This research presents an empirical application from the CRM system development context to test a recently developed technique, which makes it possible to measure endogenous formative constructs in structural models. PLS path modeling is used to demonstrate the feasibility of measuring antecedent relationships at the formative indicator level, not the formative construct level. Empirical results show that this technique is a promising approach to measure antecedent relationships of formative constructs in SEM.
[1] Bagozzi, Richard P. (2011) Measurement and meaning in information
systems and organizational research: Methodological and philosophical
foundations. MIS Quarterly, Vol. 35, No: 2, 261-292.
[2] Barclay, D. W – Higgins, C. A – Thompson, R. (1995) The partial least
squares approach to causal modeling: Personal computer adoption and
use as illustration. Technology Studies, Vol. 2, No: 2, 285–309.
[3] Barki, Henri – Rivard, Suzanne – Talbot, Jean (2001) An integrative
contingency model of software project risk management. Journal of
Management Information Systems, 17:4, 37-69.
[4] Bollen, Kenneth A. (2011) Evaluating effect composite, and causal
indicators in structural equation models. MIS Quarterly, Vol. 35, No: 2,
359–372.
[5] Cadogan, J.W, & Lee, N. (2010). Improper use of endogenous
formative variables. Accepteed at: Journal of Business Research, 18
October 2010, 1-34.
[6] Cenfetelli, Ronald T. – Bassellier, Geneviève (2009) Interpretation of
formative measurement in information systems research. MIS Quarterly,
Vol. 33, No: 4, 689–708.
[7] Chen, Injazz J. – Popovich, Karen (2003) Understanding customer
relationship management (CRM). People, process and technology.
Business Process Management Journal, Vol. 9, No: 5, 672-688.
[8] Chin, Wynne W. (1998) Issues and opinion on structural equation
modeling. MIS Quarterly, Vol. 22, March 1998, 7−16.
[9] Coltman, Tim– Devinney, Timothy M. – Midgley, David F. – Venaik,
Sunil (2008) Formative versus reflective measurement models: Two
applications of formative measurement. Journal of Business Research,
Vol. 61, No: 12, 1250–1262.
[10] Diamantopoulos, Adamantios (2006) The error term in formative
measurement models: Interpretation and modeling implications. Journal
of Modelling in Management, Vol. 1, No: 1, 7–17.
[11] Diamantopoulos, Adamantios – Riefler, Petra – Roth, Katharina P.
(2008) Advancing formative measurement models. Journal of Business
Research, Vol. 61, No: 12, 1203–1218.
[12] Diamantopoulos, Adamantios – Siguaw, Judy A. (2006) Formative
versus reflective indicators in organizational measure development: A
comparison and empirical illustration. British Journal of Management,
Vol. 17, No: 4, 263–282.
[13] Diamantopoulos, Adamantios – Winklhofer, Heidi M. (2001) Index
construction with formative indicators: An alternative to scale
development. Journal of Marketing Research, Vol. 38, No: 2, 269–277.
[14] Edwards, Jeffrey R. (2001) Multidimensional constructs in
organizational behavior research: An integrative analytical framework.
Organizational Research Methods, Vol. 4, No: 2, 144-192.
[15] Edwards, Jeffrey R. – Bagozzi, Richard P. (2000) On the nature and
direction of relationships between constructs and measures.
Psychological Methods, Vol. 5, No: 2, 155–174.
[16] Fichman, Robert G. (2004a) Going beyond the dominant paradigm for
information technology innovation research: Emerging concepts and
methods. Journal of the AIS, Vol. 5, No: 8, 314–355.
[17] Fjermestad, Jerry – Romano, Nicholas C. (2003) Electronic customer
relationship management. Revisiting the general principles of usability
and resistance – an integrative implementation framework. Business
Process Management Journal, Vol. 9, No: 5, 572-591.
[18] Gemino, Andrew – Reich, Blaize Horner – Sauer, Chris (2008) A
temporal model of information technology project performance. Journal
of Management Information Systems, Vol. 24, No: 3, 9-44.
[19] Hair, Joe F. – Ringle, Christian M. – Sarstedt, Marko (2011). PLS-SEM:
Indeed a silver bullet. Journal of Marketing Theory and Practice, Vol.
19, No: 2, 139–151.
[20] Hair Joe F. – Sarstedt, Marko – Ringle, Christian M. – Mena, Jeanette A.
(2011) An assessment of the use of partial least squares structural
equation modeling in marketing research. Accepted in: Journal of the
Academy of Marketing Science, 17 May 2011.
[21] Henseler, Jörg – Ringle, Christian M. – Sinkovics, Rudolf R. (2009) The
use of partial least squares path modeling in international marketing.
Advances in International Marketing, Vol. 20, 277–320.
[22] Howell, Roy D. – Breivik, Einar – Wilcox, James B. (2007)
Reconsidering formative measurement. Psychological Methods, Vol. 12,
No: 2, 205-218.
[23] Jarvis, Cheryl Burke – MacKenzie, Scott B. – Podsakoff, Philip M.
(2003) A critical review of construct indicators and measurement model
misspecification in marketing and consumer research. Journal of
Consumer Research, Vol. 30, September 2003, 199–218.
[24] Jöreskog, Karl G. (1973) A general method for estimating a linear
structural equation system. In: Structural Equation Models in the Social
Sciences, ed. by A.S. Goldberger & O.D. Duncan, 255-284. Seminar
Press: New York.
[25] Karimi, Jahangir – Somers, Toni M. – Bhattacherjee, Anol (2007a) The
impact of ERP implementation on business process outcomes: A factor-
based study. Journal of Management Information Systems, Vol. 24, No:
1, 101-134.
[26] Karimi, Jahangir – Somers, Toni M. – Bhattacherjee, Anol (2007b) The
role of information systems resources in ERP capability building and
business process outcomes. Journal of Management Information
Systems, Vol 24, No: 2, 221-260.
[27] Leonard-Barton, Dorothy (1988) Implementation as mutual adaptation
of technology and organization. Research Policy, Vol. 17, No: 5, 251-
267.
[28] Lohmöller, Jan-Bernd (1989) Latent variable path modeling with partial
least squares. Physica: Heidelberg.
[29] MacKenzie, Scott B. – Podsakoff, Philip M. – Jarvis, Cheryl Burke
(2005) The problem of measurement model misspecification in
behavioral and organizational research and some recommended
solutions. Journal of Applied Psychology, Vol. 90, No: 4, 710-730.
[30] MacKenzie, Scott B. – Podsakoff, Philip M. – Podsakoff, Nathan P.
(2011) Construct measurement and validation procedures in MIS and
behavioral research: Integrating new and existing techniques. MIS
Quarterly, Vol. 35, No: 2, 293–334.
[31] Nidumolu, Sarma (1995) The effect of coordination and uncertainty on
software project performance: Residual performance risk as an
intervening variable. Information Systems Research, Vol. 6, No: 3, 191-
219.
[32] Pavlou, Paul A. – El Sawy, Omar A. (2006) From IT leveraging
competence to competitive advantage in turbulent environments: The
case of new product development. Information Systems Research, Vol.
17, No: 3, 198–227.
[33] Petter, Stacie – Straub, Detmar – Rai, Arun (2007) Specifying formative
constructs in information systems research. MIS Quarterly, Vol. 31, No:
4, 623-656.
[34] Ravichandran, T. – Lertwongsatien, Chalermsak (2005) Effect of
information systems resources and capabilities on firm peformance: A
resource-based perspective. Journal of Management Information
Systems, Vol. 21, No: 4, 237-276.
[35] Ross, Jeanne W – Beath, Cynthia Mathis – Goodhue, Dale L. (1996)
Develop long-term competitiveness through IT assets. Sloan
Management Review, Vol. 37, Fall 1996, 31-42.
[36] Rossiter, John R. (2002) The C-OAR-SE procedure for scale
development in marketing. International Journal of Research in
Marketing, Vol. 19, No: 4, 305–335.
[37] Wallace, Linda – Keil, Mark – Rai, Arun (2004) How software project
risk affects project performance: An investigation of the dimensions of
risk and an exploratory model. Decision Sciences, Vol. 35, No: 2, 289-
321.
[38] Wilcox, James B. – Howell, Roy D. – Breivik, Einar (2008) Questions
about formative measurement. Journal of Business Research, Vol. 61,
1219-1228.
[39] Wold, Herman (1982) Soft modeling: the basic design and some
extensions. In: Systems under indirect observations: Part I, ed. by K.G.
Jöreskog & H. Wold, 1-54. North-Holland: Amsterdam.
[40] Zablah, Alex R. – Bellenger, Danny N. – Johnston, Wesley J. (2004b)
Customer relationship management implementation gaps. Journal of
Personal Selling and Sales Management, Vol. 24, No: 4, 279-295.
[1] Bagozzi, Richard P. (2011) Measurement and meaning in information
systems and organizational research: Methodological and philosophical
foundations. MIS Quarterly, Vol. 35, No: 2, 261-292.
[2] Barclay, D. W – Higgins, C. A – Thompson, R. (1995) The partial least
squares approach to causal modeling: Personal computer adoption and
use as illustration. Technology Studies, Vol. 2, No: 2, 285–309.
[3] Barki, Henri – Rivard, Suzanne – Talbot, Jean (2001) An integrative
contingency model of software project risk management. Journal of
Management Information Systems, 17:4, 37-69.
[4] Bollen, Kenneth A. (2011) Evaluating effect composite, and causal
indicators in structural equation models. MIS Quarterly, Vol. 35, No: 2,
359–372.
[5] Cadogan, J.W, & Lee, N. (2010). Improper use of endogenous
formative variables. Accepteed at: Journal of Business Research, 18
October 2010, 1-34.
[6] Cenfetelli, Ronald T. – Bassellier, Geneviève (2009) Interpretation of
formative measurement in information systems research. MIS Quarterly,
Vol. 33, No: 4, 689–708.
[7] Chen, Injazz J. – Popovich, Karen (2003) Understanding customer
relationship management (CRM). People, process and technology.
Business Process Management Journal, Vol. 9, No: 5, 672-688.
[8] Chin, Wynne W. (1998) Issues and opinion on structural equation
modeling. MIS Quarterly, Vol. 22, March 1998, 7−16.
[9] Coltman, Tim– Devinney, Timothy M. – Midgley, David F. – Venaik,
Sunil (2008) Formative versus reflective measurement models: Two
applications of formative measurement. Journal of Business Research,
Vol. 61, No: 12, 1250–1262.
[10] Diamantopoulos, Adamantios (2006) The error term in formative
measurement models: Interpretation and modeling implications. Journal
of Modelling in Management, Vol. 1, No: 1, 7–17.
[11] Diamantopoulos, Adamantios – Riefler, Petra – Roth, Katharina P.
(2008) Advancing formative measurement models. Journal of Business
Research, Vol. 61, No: 12, 1203–1218.
[12] Diamantopoulos, Adamantios – Siguaw, Judy A. (2006) Formative
versus reflective indicators in organizational measure development: A
comparison and empirical illustration. British Journal of Management,
Vol. 17, No: 4, 263–282.
[13] Diamantopoulos, Adamantios – Winklhofer, Heidi M. (2001) Index
construction with formative indicators: An alternative to scale
development. Journal of Marketing Research, Vol. 38, No: 2, 269–277.
[14] Edwards, Jeffrey R. (2001) Multidimensional constructs in
organizational behavior research: An integrative analytical framework.
Organizational Research Methods, Vol. 4, No: 2, 144-192.
[15] Edwards, Jeffrey R. – Bagozzi, Richard P. (2000) On the nature and
direction of relationships between constructs and measures.
Psychological Methods, Vol. 5, No: 2, 155–174.
[16] Fichman, Robert G. (2004a) Going beyond the dominant paradigm for
information technology innovation research: Emerging concepts and
methods. Journal of the AIS, Vol. 5, No: 8, 314–355.
[17] Fjermestad, Jerry – Romano, Nicholas C. (2003) Electronic customer
relationship management. Revisiting the general principles of usability
and resistance – an integrative implementation framework. Business
Process Management Journal, Vol. 9, No: 5, 572-591.
[18] Gemino, Andrew – Reich, Blaize Horner – Sauer, Chris (2008) A
temporal model of information technology project performance. Journal
of Management Information Systems, Vol. 24, No: 3, 9-44.
[19] Hair, Joe F. – Ringle, Christian M. – Sarstedt, Marko (2011). PLS-SEM:
Indeed a silver bullet. Journal of Marketing Theory and Practice, Vol.
19, No: 2, 139–151.
[20] Hair Joe F. – Sarstedt, Marko – Ringle, Christian M. – Mena, Jeanette A.
(2011) An assessment of the use of partial least squares structural
equation modeling in marketing research. Accepted in: Journal of the
Academy of Marketing Science, 17 May 2011.
[21] Henseler, Jörg – Ringle, Christian M. – Sinkovics, Rudolf R. (2009) The
use of partial least squares path modeling in international marketing.
Advances in International Marketing, Vol. 20, 277–320.
[22] Howell, Roy D. – Breivik, Einar – Wilcox, James B. (2007)
Reconsidering formative measurement. Psychological Methods, Vol. 12,
No: 2, 205-218.
[23] Jarvis, Cheryl Burke – MacKenzie, Scott B. – Podsakoff, Philip M.
(2003) A critical review of construct indicators and measurement model
misspecification in marketing and consumer research. Journal of
Consumer Research, Vol. 30, September 2003, 199–218.
[24] Jöreskog, Karl G. (1973) A general method for estimating a linear
structural equation system. In: Structural Equation Models in the Social
Sciences, ed. by A.S. Goldberger & O.D. Duncan, 255-284. Seminar
Press: New York.
[25] Karimi, Jahangir – Somers, Toni M. – Bhattacherjee, Anol (2007a) The
impact of ERP implementation on business process outcomes: A factor-
based study. Journal of Management Information Systems, Vol. 24, No:
1, 101-134.
[26] Karimi, Jahangir – Somers, Toni M. – Bhattacherjee, Anol (2007b) The
role of information systems resources in ERP capability building and
business process outcomes. Journal of Management Information
Systems, Vol 24, No: 2, 221-260.
[27] Leonard-Barton, Dorothy (1988) Implementation as mutual adaptation
of technology and organization. Research Policy, Vol. 17, No: 5, 251-
267.
[28] Lohmöller, Jan-Bernd (1989) Latent variable path modeling with partial
least squares. Physica: Heidelberg.
[29] MacKenzie, Scott B. – Podsakoff, Philip M. – Jarvis, Cheryl Burke
(2005) The problem of measurement model misspecification in
behavioral and organizational research and some recommended
solutions. Journal of Applied Psychology, Vol. 90, No: 4, 710-730.
[30] MacKenzie, Scott B. – Podsakoff, Philip M. – Podsakoff, Nathan P.
(2011) Construct measurement and validation procedures in MIS and
behavioral research: Integrating new and existing techniques. MIS
Quarterly, Vol. 35, No: 2, 293–334.
[31] Nidumolu, Sarma (1995) The effect of coordination and uncertainty on
software project performance: Residual performance risk as an
intervening variable. Information Systems Research, Vol. 6, No: 3, 191-
219.
[32] Pavlou, Paul A. – El Sawy, Omar A. (2006) From IT leveraging
competence to competitive advantage in turbulent environments: The
case of new product development. Information Systems Research, Vol.
17, No: 3, 198–227.
[33] Petter, Stacie – Straub, Detmar – Rai, Arun (2007) Specifying formative
constructs in information systems research. MIS Quarterly, Vol. 31, No:
4, 623-656.
[34] Ravichandran, T. – Lertwongsatien, Chalermsak (2005) Effect of
information systems resources and capabilities on firm peformance: A
resource-based perspective. Journal of Management Information
Systems, Vol. 21, No: 4, 237-276.
[35] Ross, Jeanne W – Beath, Cynthia Mathis – Goodhue, Dale L. (1996)
Develop long-term competitiveness through IT assets. Sloan
Management Review, Vol. 37, Fall 1996, 31-42.
[36] Rossiter, John R. (2002) The C-OAR-SE procedure for scale
development in marketing. International Journal of Research in
Marketing, Vol. 19, No: 4, 305–335.
[37] Wallace, Linda – Keil, Mark – Rai, Arun (2004) How software project
risk affects project performance: An investigation of the dimensions of
risk and an exploratory model. Decision Sciences, Vol. 35, No: 2, 289-
321.
[38] Wilcox, James B. – Howell, Roy D. – Breivik, Einar (2008) Questions
about formative measurement. Journal of Business Research, Vol. 61,
1219-1228.
[39] Wold, Herman (1982) Soft modeling: the basic design and some
extensions. In: Systems under indirect observations: Part I, ed. by K.G.
Jöreskog & H. Wold, 1-54. North-Holland: Amsterdam.
[40] Zablah, Alex R. – Bellenger, Danny N. – Johnston, Wesley J. (2004b)
Customer relationship management implementation gaps. Journal of
Personal Selling and Sales Management, Vol. 24, No: 4, 279-295.
@article{"International Journal of Information, Control and Computer Sciences:57822", author = "Samppa Suoniemi and Harri Terho and Rami Olkkonen", title = "The Measurement of Endogenous Higher-Order Formative Composite Variables in PLS-SEM: An Empirical Application from CRM System Development", abstract = "In recent methodological articles related to structural equation modeling (SEM), the question of how to measure endogenous formative variables has been raised as an urgent, unresolved issue. This research presents an empirical application from the CRM system development context to test a recently developed technique, which makes it possible to measure endogenous formative constructs in structural models. PLS path modeling is used to demonstrate the feasibility of measuring antecedent relationships at the formative indicator level, not the formative construct level. Empirical results show that this technique is a promising approach to measure antecedent relationships of formative constructs in SEM.
", keywords = "CRM system development, formative measures, PLS
path modeling, research methodology.", volume = "6", number = "12", pages = "1685-5", }
