Partial Least Square (PLS): SEM

Rules for working on PLS-SEM:

Rule No.1: Variables are of two types: Observed and Latent
Observed Variables are those which are directly measured from respondents,
represented by in AMOS and Latent Variables are those which are inferred
indirectly and represented by
Different Names
Latent Variables / Factor / Construct
Observed Variable / Statement / Item
Rule No.2: Scales are of 2 types: Formative & Reflective
Reflective scales work on Uni-dimensionality i.e. All statements are measuring
exactly same thing, hence the statements are almost same and hence correlated.
The reason the same thing is asked again & again is to ascertain Reliability of the
respondents. Removing any 1-2 statements won't make any difference.
Example:
 I like introducing new brands and new products to my friends
 I like helping people by providing them with information about many kinds
of products
 People ask me for information about products, places to shop or sales
 My friends think of me a good source of information when it comes to new
products or sales
AMOS works only on Reflective Scales

Formative Scales checks many dimensions and hence the statements are not
correlated. Removing any of the statement will have impact on content validity.
Example:
 I like introducing new brands and new products to my friends
 I always check price of the product with various vendors before buying it
 I critically evaluate the promotions before buying
 I prefer offline mode of payment as it is more secure
PLS works on both Formative as well as Reflective Scales
Graphical Representation:

Reflective Model Formative Model

Rule No.3: Only can be DV or IDV. Every must be connected to a

Outer Model

Inner Model

Formative Model

Reflective Model
Reflective Model

Inner Model is Structural model.

Outer Model is measurement model.
Rule No.4: None of the can exist on canvas without a . We can make
single statement Construct.
Rule No.5: PLS does not work on Measurement Model alone i.e. We can't
work on Zero-order Constructs or Second-order constructs alone for measuring
their Convergent Validity. Instead, It always works on Structural Model i.e. a
model having definite DVs and IDVs.
 Key Characteristics of PLS-SEM
Data Requirements:
1. Sample Size (Thumb rule of 10)
2. No assumption for Normality
3. Highly robust for missing values
4. Can work with Metric measurement (Interval), Ordinal as well as Binary coded variables.
Some limitations if DV is Categorical var.

Model Characteristics
1. Can work on Reflective as well as Formative models
2. Can work on Single statement factor
3. Work on Recursive models only (No feedback loop allowed e.g.
Leader -> Motivation->Performance->Leader

Model Evaluation:
1. No global Goodness of fit indicator
2. What to see in Measurement Model:
a) What to see in Reflective Model:
Convergent Validity: Construct Reliability, Internal Consistency, AVE
Discriminant Validity: Cross Loading, AVE > MSV, HTMT
b) What to see in Formative Model:
Content Validity and Convergent Validity
Significance value (Which in turn will give idea of Multi-Collinearity)
3. What to see in Path Model (Structural Part):
Significance value
Coefficient of Determination (r2)
Effect Size
Multi-Collinearity
4. Higher Effects: Mediation, Moderation, Interaction