How To Guide For SmartPLS

Learn About Structural Equation
Modeling in SmartPLS With Data

From the Customer Behavior in
Electronic Commerce Study in
Ecuador (2017)
© 2019 SAGE Publications, Ltd. All Rights Reserved.

This PDF has been generated from SAGE Research Methods Datasets.
SAGE SAGE Research Methods Datasets Part
2019 SAGE Publications, Ltd. All Rights Reserved. 2
Learn About Structural Equation

Modeling in SmartPLS With Data
From the Customer Behavior in
Electronic Commerce Study in
Ecuador (2017)
How-to Guide for SmartPLS
Introduction
Partial Least Squares Structural Equation Modeling (PLS-SEM) is useful when
the research needs to predict a set of dependent variables from a large set
of independent variables (Abdi, 2007). This example shows in which situations
researchers should use this technique with respect to other predictive multivariate
techniques. We illustrate PLS-SEM using a subset of 2017 Customer Behavior in
Electronic Commerce Study in Ecuador.
Specifically, we test whether Behavioral Intention (BI) is predicted by Performance

Expectancy (PE), Effort Expectancy (EE), Social Influence (SI), and Facilitating
Conditions (FC). According to the UTAUT Model, BI is an indicator of how people
are willing to shop online. PE is defined as the degree to which e-commerce will
provide benefits to consumers for shopping. SI is the extent to which consumers
perceive that importance others (e.g., family and friends) believe they should use
Internet for shopping. FC refer to consumers’ perceptions of the resources and
support available to shop online. The last variable, EE, is the degree of ease
associated with consumers’ use of Internet for shopping. This example is useful if
Learn About Structural Equation Modeling in SmartPLS With Data From the
Page 2 of 19
Customer Behavior in Electronic Commerce Study in Ecuador (2017)
we want to understand what drives the intention to shop online.
Contents
1. Partial Least Square Structural Equation Modeling (PLS-SEM)

2. An Example in SmartPLS: Behavioral Intention to Shop Online in
Ecuador
2.1 Estimating SEM-PLS With SmartPLS
2.2 The SmartPLS Procedure
2.3 Presenting Results
3. Your Turn
1 Partial Least Square Structural Equation Modeling (PLS-SEM)

Structural equation modeling (SEM) is a multivariate statistical technique that
allows researchers to estimate and test causal relationships. This method
originated in the context of genetics, to examine the joint effect of one or more
independent variables, which were represented in a path diagram, which is why it
is also sometimes called broadly, path analysis.
In these models, the types of variables are distinguished according to their

measurement or role in the model: (i) latent variables: also known as constructs,
factors, concepts, or conceptual variables—they are the model features of direct
interest, but they are unobservable elements that can only be inferred from
those observed; (ii) observed variables, also called indicators, inputs, or simply
measures, and are distinguished because they can be measured and are known
or thought to be related to the latent concepts. An example is intelligence, which
constitutes the construct and can be observed through the measurement of
variables observed as verbal and quantitative reasoning test scores, for instance,
among other measurable indicators.
Page 3 of 19
In turn, these latent variables, depending on their role in the model, can be
exogenous and endogenous. The exogenous affect others and do not receive
influence, while the endogenous ones receive influence from other variables
but also can affect each other. Conventionally, graphically, these models are
represented with the latent variables in Greek letters within circles, and the
observed variables are represented in Latin letters within rectangles. The
relationship between the observed variables or indicators and the latent variables
is known as the measurement model or outer model, while the relationship
structure between the latent variables or concepts of the model is called the
structural model or inner model. Both models are represented graphically by
arrows in trajectory diagrams (Henlein & Kaplan, 2004). The direction of the
arrows between the observed and latent variables, theoretically, indicates whether
the observed measurements are reflective indicators (each indicator is a reflection
or direct observation of the latent variable or construct) or formative indicators
(where some set of indicators together jointly determine the latent variable). The
entire process to establish or represent the structural model is known as the
specification or identification of the model.
Next, a graphic representation of a model of structural equations is shown in

which it is established that the intent of online purchase—endogenous conceptual
variable—is predicted by Performance Expectancy, Effort Expectancy, Social
Influence, and Facilitating Conditions, exogenous conceptual variables (see
Figure 1). In turn, each of these latent variables is measured by sets of indicators
or observed variables, specifically the score of the items on the scale of each of
these variables. The hypotheses are established as the predicted relationships
between the latent variables, specifically by the expected effect of the four
exogenous variables on the endogenous one.
In this example, the relationships of all the indicators with their respective latent
variables are presented as reflective indicators, since each survey question
Page 4 of 19
measure is only one of a set of indicators of their respective concept.
Figure 1: Path Diagram of a Structural Equations Model.
2 An Example in SmartPLS: Behavioral Intention to Shop Online in Ecuador

2.1 Estimating SEM-PLS With SmartPLS
The estimation of structural models consists of two stages—first, estimation of
the measurement model or outer model, and second, estimation of the structural
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model or inner model—as described below:
• Measurement model assessment: The fundamental purpose of this stage

is to evaluate the assumptions related to the reliability and validity of the
structural measurement model, identified in the SmartPLS program as
“PLS Algorithm.” When running the PLS algorithm, the initial weights of
all indicators in determining their construct within the PLS path model are
set to +1 (the default SmartPLS setting). Also, by default, the program
estimates these weights, called the “Path” weighting scheme, to maximize
the values of R2 or variance explained, sets the maximum iterations in

weights estimation to 300 (which is useful for exploratory models, but
as the estimation becomes more confirmatory, at least 1,000 and up to
5,000 iterations are recommended); and set the Stop Criterion to 10−7;
this setting is generally recommended as adequately fine tolerance (if
convergence problems arise, reducing tolerance to 10−5 is often

suggested).
• Structural model assessment: The structural model is evaluated with
respect to the estimates and hypothesis tests regarding the causal relations
between exogenous and endogenous variables specified in the path
diagram. Standard errors and test statistics for the relevant parameters are
estimate in SmartPLS with the Bootstrapping option. (The measurement
model estimation and the structure of the SEM causal model imply that
analytic standard errors derived from normal assumptions or
approximations, as used in regression analysis as an example, would be
inappropriate in this context; thus, bootstrapping is strongly advised.)
In bootstrapping, subsamples are randomly drawn observations from the original

set of data (with replacement). Each subsample is then used to estimate the PLS
path model. This process is repeated until many random subsamples have been
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created (e.g., 5,000). The variation across these many (e.g., 5,000) estimations
from the bootstrap subsamples is used to derive standard errors for the PLS-
SEM results. With this information, standard errors, Beta coefficients, t-values,
p-values, and confidence intervals can be calculated to assess the PLS-SEM
estimation results.
The (fit) quality criteria are the most relevant output values for assessing both
phases of the PLS-SEM estimation. Specifically, the criteria and generally
suggested interpretation are summarized in Table 1.
Table 1: Criteria for Evaluating the Quality of the Measurement Model

(Outer Model).
Quality
Description
criteria
Coefficient of determination. Indicates the percentage of the variance in the endogenous variable that the
R2 exogenous variables explain collectively. Can take values between 0 and 1, where values closer to 0 represent
poor fit and values closer to 1 represent a better fit.
Measures effect size and the strength of the relationship between the variables on a numeric scale related to
total, explained, and error variances. Higher is generally considered better, although “sufficiently high” values
will vary considerably across contexts. Nonetheless, these general guidelines have been offered:
f2 Above 0.35 large effect size

Ranging from 0.15 to 0.35 medium effect size
Between 0.02 and 0.15 small effect size
Values less than 0.02 are considered essentially zero effect size
Cronbach’s Alpha is a measure of internal consistency or reliability of a construct’s measure, that is, how
closely related the set of items comprising the construct are as a group. The result is usually a number from 0
to 1, but a negative Cronbach’s Alpha can also occur, suggesting something seriously wrong with the operation
(e.g., if some score items have polarity reversed relative to some others, the mean of all the inter-item
Construct
correlations can be negative: items’ polarity should always be aligned). General guidelines on Cronbach’s
Reliability
Alpha for Construct Reliability and Validity are:
and
Validity
Below 0.60 unacceptable
0.60–0.70 minimally acceptable
0.70–0.80 respectable
0.80–0.90 very good
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Above 0.90 strong
Composite reliability (CR), also referred to as McDonald’s coefficient, is obtained by combining all the true
score variances and covariances in the composite of indicator variables related to constructs and by dividing
this sum by the total variance in the composite. Like Cronbach’s Alpha, CR is a reliability indicator, but
Cronbach’s Alpha assumes factor loadings to be the same for all items, whereas CR takes into consideration
the varying factor loadings of the items. Acceptable values of CR are generally considered 0.7 and above.
Average of variance extracted (AVE) is an indicator of convergent validity that measures the amount of
variance that is captured by a construct in relation to the amount of variance due to measurement error.
Generally, AVE of at least 0.5 or higher is demanded, otherwise variance of error is more than variance
explained, which is considered unacceptable.
Discriminant validity, finally, determines whether the constructs in the model are highly correlated among
themselves or not. It compares the Square Root of AVE of a particular construct with the correlation between
that construct with other constructs. It is generally suggested that the Square Root of AVE should be higher
than the correlation of the construct with others (If not, the individual construct does not provide much
discrimination, i.e., unique explanatory power).
Collinearity
Variance inflation factor is a measure of the amount of multicollinearity among a set of multiple regression
Statistics
variables. Values greater than 4 are generally considered to indicate problematically high multicollinearity.
(VIF)
Standardized Root Mean Square Residual is an index of the average of standardized residual between the
observed and the hypothesized covariance matrices. Although recommendations vary across sources, a good
adjustment is generally considered to be less than 0.10 or 0.08.
Model fit
Chi Square (χ2), the model is generally considered to have an acceptable fit if the Chi-square/df values are
from 2 to 3 and with limits of up to 5.
For reflective models, these are the key indicators showing the trajectory of the Latent variable towards the
Outer
observed variables. Therefore, they show how much each observable variable or item contributes absolutely to
loadings
the definition of the construct or latent variable. Loadings are generally expected to be greater than .6.
They are indicators typical of the formative models, since they illustrate the trajectory from the Observed
Outer
variable to the Latent variables. These indicate the relative contribution of an indicator to the definition of its
weights
corresponding variable. It is also expected to be greater than .7.
Analogous to regression residuals, the residue indicates the variance that does not ultimately go into
Residue
explaining the factor. As this “waste” is lower, a better fit of the model is indicated.
2.2 The SmartPLS Procedure

We have summarized the process for the calculation of PLS-SEM in SmartPLS in
Page 8 of 19
five stages, as shown in Figure 2.
Figure 2: Summary of the Process for the PLS-SEM in SmartPLS Software.
Step 1—Prepare Your Data
• The database must be loaded in Excel

• Files with more than one worksheet are not processed
• All information must be expressed in numeric language
• Subject by row and variables by columns
Page 9 of 19
• Save in CSV format delimited by commas

• All variables must be of numeric
• If you have inverse items, they must be corrected prior to being exported to
the program
• To optimize the work of reporting the data, use the coding as it will appear
in the final work
Step 2—Create Your Project
Open the software (available in https://www.smartpls.com/) (Ringle, Wende, &

Becker, 2015) and follow the following commands: New Project → Create New
Project → naming the Project. As shown in Figure 3.
Figure 3: Screenshots of the Project Creation Process in SmartPLS Software.
Upon conclusion of the project creation, the command to import the data will
appear in the upper right panel. Double-click as indicated and look in the library of
your computer for the data file, select it and press open (see Figure 4).
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Figure 4: Screenshots to Import Data in SmartPLS Software.
Step 3—Explore Your Data
Once the data have been imported, you can view the descriptive statistics of the
variables under study in the lower right panel (e.g., Mean, Medium, Min, Max,
Standard deviation, Excess Kurtosis, and Skewness) (see Figure 4, Step 5).
Step 4—Specify the Theoretical Model
To specify the model, use the superior command “new path model.” Clicking this
will bring up a dialog box to name your path diagram. Now you can visualize the
graphics resources in the upper part that will allow you to draw it. First, place
the latent variables and then the arrows as theoretically established. Initially, they
appear as red circles (see Figure 5).
Figure 5: Description of the Model Specification in SmartPLS Software.
Page 11 of 19
With the right button on each variable latent, you can label the variables. With the
“connect” command, you can identify with an arrow and establish the relationships
between the variables (see Figure 5, Step 7). Then, load the observed variables
or indicators to the model. To do so, select the lower right panel identified with the
indicator name and drag the corresponding items to each variable and drop it over
the corresponding latent circle or variable. Progressively, as the indicators of each
variable are loaded, originally in red circles, they will turn blue, and the indicators
or items will be reflected in yellow rectangles. Now you can see the model in the
following way, as it was seen in Figure 1 previously described.
Step 5—Calculate the Model
As previously described, the calculation process involves two moments, the

evaluation of the measurement model or outer model and assessment of the
structural model or inner model. To evaluate the measurement model, follow the
following commands:
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Calculate → PLS Algorithm → Basic Setting (Path) – Maximum Iterations

(300) Stop Criterion (7) → Start Calculation
At the conclusion of the calculation, you can see all the indicators associated
with the measurement model in the lower right panel. In the upper tabs of this
quadrant, you can review this information numerically and graphically (see Figure
6).
Figure 6: Screening of the Data Output of the Measurement Model.
Subsequently, for the calculation of the structural model, a similar process is

followed, whose commands are described below:
Calculate → Bootstrapping → Basic Setting (Subsamples 500) –

Advanced Setting (Confidence Interval Method – Bias-Corrected and
Accelerate (BCa) Bootstrap) – Two-Tailed - Significance Level → Start
Calculation
Similarly, in the lower right panel, you can see the indicators associated with the
Page 13 of 19
evaluation of the structural model hypotheses.
2.3 Presenting Results

The results from a PLS-SEM should be reported according to the processing
structure as described below:
Measurement Model Assessment

All constructs in this research model are first-order reflective. Measurement quality
being verified by examining convergent validity, discriminant validity, and internal
consistency. Convergent validity was assessed as follows: item reliability was
inspected for each Convergent item, validity requires indicator loadings to be 0.6
or more. All indicators had loadings well above 0.6.
Remaining item loadings (see Table 2) demonstrated the acceptable convergent

validity and were retained for subsequent analysis. Composite reliability indicators
were higher than 0.7, and internal consistency was assessed via Cronbach’s
Alpha Coefficient, and all values were above 0.8, indicating excellent (1.0–0.90)
reliability for all the constructs. The average of variance extracted (AVE) was also
examined for each construct, and values were substantially higher than Chin’s
(1998) suggested 0.5 thresholds.
Table 2: Summary Results for Outer Model.

Outer Composite Cronbach’s Average of variance
Construct Indicator
loading reliability Alpha extracted
PE1 0.807
PE2 0.772
Performance Expectancy
PE3 0.815 0.92 0.89 0.64
(PE)
PE4 0.818
PE5 0.770
Page 14 of 19
PE6 0.831
EE1 0.837
EE2 0.890
Effort Expectancy (EE) 0.91 0.86 0.71
EE3 0.763
EE4 0.865
SI1 0.821
SI2 0.865
Social Influence (SI) 0.91 0.88 0.72
SIC3 0.888
SI4 0.822
FC1 0.775
FC2 0.897
Facilitating Conditions
0.93 0.91 0.73
(FC)
FC3 0.873
FC4 0.875
INT1 0.904
Behavioral Intention (BI) INT2 0.923 0.94 0.90 0.83
INT3 0.904
In regard to the discriminant validity, we compared all items loaded in which

we expected a higher value with the same construct than other variables (see
Table 3). This comparison satisfying discriminant validity suggested by Chin’s
criteria (2010). Second, the square root of AVE for each construct was higher
than the inter-scale correlation (see Table 4). In summary, these results indicate
satisfactory reliability and convergent validity.
Page 15 of 19
Table 3: Cross Factor Loadings and Reliability of Constructs.

Performance Effort Social Facilitating Behavioral
Expectancy Expectancy Influence Conditions Intention
PE1 0.81 0.64 0.34 0.63 0.51
PE2 0.77 0.59 0.30 0.56 0.47
PE3 0.82 0.57 0.36 0.50 0.44
PE4 0.82 0.56 0.41 0.49 0.43
PE5 0.77 0.59 0.45 0.51 0.44
PE6 0.83 0.66 0.44 0.57 0.49
EE1 0.65 0.84 0.46 0.60 0.50
EE2 0.71 0.89 0.44 0.69 0.56
EE3 0.50 0.76 0.44 0.54 0.37
EE4 0.64 0.86 0.45 0.72 0.55
SI1 0.36 0.39 0.82 0.27 0.22
SI2 0.47 0.55 0.87 0.54 0.45
SI3 0.38 0.42 0.89 0.35 0.29
SI4 0.37 0.38 0.82 0.34 0.26
FC1 0.59 0.60 0.49 0.77 0.53
FC2 0.61 0.67 0.43 0.86 0.54
FC3 0.58 0.68 0.40 0.90 0.57
FC4 0.57 0.65 0.34 0.87 0.54
FC5 0.57 0.68 0.37 0.88 0.56
Page 16 of 19
INT1 0.51 0.56 0.34 0.60 0.90
INT2 0.54 0.55 0.33 0.59 0.92
INT3 0.53 0.53 0.39 0.56 0.90
Note: Bold values indicate higher factorial loads.
Table 4: Construct Correlation Matrix.

Performance Expectancy Effort Expectancy Social Influence Facilitating Conditions Behavioral Intention
PE 0.80
EE 0.75 0.84
SI 0.47 0.53 0.85
FC 0.68 0.77 0.47 0.86
BI 0.58 0.59 0.39 0.64 0.91
Note: Bold values indicate higher factorial loads.
Structural Model and Hypothesis Testing

Based on SEM-PLS, we used the following criteria to assess the hypothesis
model: R2 adjusted value, Beta Coefficient, and f2 effect size. Before testing the
structural model, fit adjustment with Standardized Root Mean Square Residual
value was evaluated. The result was 0.06, which indicated a good fit adjustment.
In respect to the predictive power of the model provided for Behavioral Intention,
R2 adjusted value indicates that the model explains 45% of the variance in
BI. Bootstrapping was performed to provide a significance level for each
hypothesized relationship, parameter settings for bootstrapping included no sign
changes, and the 500 samples. According to the results, PE, EE, and FC predict
Page 17 of 19
significantly BI to use online methods to shop (see Table 5), in particular, FC
showed to be the best predictor, followed by the PE. According to f2, values of
0.02, 0.15, and 0.35 represent small, medium, and large effect sizes, respectively.
The f2 effect size on the BI was small for all the variables, which implies a small
but significant contribution of the variables whose hypotheses were confirmed. All
these results are summarized in Table 5.
Table 5: Summary of Hypothesis Testing.

Path Beta coefficient t-value p-value Result
H1: Performance Expectancy → Behavioral Intention 0.133 1.847 .066 Not confirm
H2: Social Influence → Behavioral Intention 0.020 0.394 .694 Not confirm
H3: Facilitating Conditions → Behavioral Intention 0.298 4.298 .000 Confirm
H4: Hedonic Motivation → Behavioral Intention 0.123 2.436 .015 Confirm
Note: Standardized Root Mean Square Residual = 0.06; Chi-square = 2.243.
3 Your Turn
You can download this sample dataset along with a guide showing how to conduct
a PLS-SEM. The sample dataset also includes demographic variables such as
gender and age. See whether you can reproduce the results presented here, and
try to conduct your own PLS-SEM: (1) for men and women separately and (2) for
young people (18–25 years old) and young adults (26–35 years old) separately.
References
Abdi, H. (2007). Partial least squares regression. Encyclopaedia of measurement
and statistics, 2, 740–744.
Chin, W. W. (1998). The partial least squares approach for structural equation
Page 18 of 19
modeling. In G. A. Marcoulides (Ed.), Modern methods for business research

(pp. 295–336). Mahwah, NJ: Lawrence Erlbaum.
Chin, W. W. (2010). How to write up and report PLS analyses. In Handbook of

partial least squares (pp. 655–690). Berlin, Germany: Springer.
Hair, J., Jr., Sarstedt, M., Hopkins, L., & Kuppelwieser, V. G. (2014). Partial
least squares structural equation modeling (PLS-SEM): An emerging tool in
business research. European Business Review, 26(2), 106–121.
Henlein, M., & Kaplan, A. M. (2004). A beginner’s guide to partial least squares
analysis. Understanding Statistics, 3(4), 283–297.
Ringle, C. M., Wende, S., & Becker, J.-M. (2015). “SmartPLS 3.” Boenningstedt,
Germany: SmartPLS GmbH. Retrieved from http://www.smartpls.com
Venkatesh, V., Morris, M. G., Davis, G. B., & Davis, F. D. (2003). User
acceptance of information technology: Toward a unified view. MIS Quarterly,
27(3), 425–478.
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Learn About Structural Equation

Modeling in SmartPLS With Data

© 2019 SAGE Publications, Ltd. All Rights Reserved.

Learn About Structural Equation

Specifically, we test whether Behavioral Intention (BI) is predicted by Performance

we want to understand what drives the intention to shop online.

1. Partial Least Square Structural Equation Modeling (PLS-SEM)

1 Partial Least Square Structural Equation Modeling (PLS-SEM)

In these models, the types of variables are distinguished according to their

Next, a graphic representation of a model of structural equations is shown in

measure is only one of a set of indicators of their respective concept.

Figure 1: Path Diagram of a Structural Equations Model.

2 An Example in SmartPLS: Behavioral Intention to Shop Online in Ecuador

model or inner model—as described below:

• Measurement model assessment: The fundamental purpose of this stage

the values of R2 or variance explained, sets the maximum iterations in

convergence problems arise, reducing tolerance to 10−5 is often

In bootstrapping, subsamples are randomly drawn observations from the original

Table 1: Criteria for Evaluating the Quality of the Measurement Model

f2 Above 0.35 large effect size

Above 0.90 strong

2.2 The SmartPLS Procedure

five stages, as shown in Figure 2.

Figure 2: Summary of the Process for the PLS-SEM in SmartPLS Software.

Step 1—Prepare Your Data

• The database must be loaded in Excel

• Save in CSV format delimited by commas

Step 2—Create Your Project

Open the software (available in https://www.smartpls.com/) (Ringle, Wende, &

Figure 3: Screenshots of the Project Creation Process in SmartPLS Software.

Figure 4: Screenshots to Import Data in SmartPLS Software.

Step 3—Explore Your Data

Step 4—Specify the Theoretical Model

Figure 5: Description of the Model Specification in SmartPLS Software.

Step 5—Calculate the Model

As previously described, the calculation process involves two moments, the

Calculate → PLS Algorithm → Basic Setting (Path) – Maximum Iterations

Figure 6: Screening of the Data Output of the Measurement Model.

Subsequently, for the calculation of the structural model, a similar process is

Calculate → Bootstrapping → Basic Setting (Subsamples 500) –

evaluation of the structural model hypotheses.

2.3 Presenting Results

Measurement Model Assessment

Remaining item loadings (see Table 2) demonstrated the acceptable convergent

Table 2: Summary Results for Outer Model.

Behavioral Intention (BI) INT2 0.923 0.94 0.90 0.83

In regard to the discriminant validity, we compared all items loaded in which

Table 3: Cross Factor Loadings and Reliability of Constructs.

PE1 0.81 0.64 0.34 0.63 0.51

PE2 0.77 0.59 0.30 0.56 0.47

PE3 0.82 0.57 0.36 0.50 0.44

PE4 0.82 0.56 0.41 0.49 0.43

PE5 0.77 0.59 0.45 0.51 0.44

PE6 0.83 0.66 0.44 0.57 0.49

EE1 0.65 0.84 0.46 0.60 0.50

EE2 0.71 0.89 0.44 0.69 0.56

EE3 0.50 0.76 0.44 0.54 0.37

EE4 0.64 0.86 0.45 0.72 0.55

SI1 0.36 0.39 0.82 0.27 0.22

SI2 0.47 0.55 0.87 0.54 0.45

SI3 0.38 0.42 0.89 0.35 0.29

SI4 0.37 0.38 0.82 0.34 0.26

FC1 0.59 0.60 0.49 0.77 0.53