Using the SmartPLS Software

Assessment of Measurement Models

Joe
Joe F.
F. Hair,
Hair, Jr.
Jr.
Founder
Founder &
& Senior
Senior Scholar
Scholar

Indicators for SEM Model Exogenous Constructs

Assessing Content Validity

Assessing Formative Constructs and Indicators

Evaluating formative constructs and indicators involves the following:
1.First examine convergent validity using redundancy analysis. That is achieved by
correlating each formative construct with a global measure for that construct. The
construct is modeled as the independent variable and the global measure is the
dependent variable. A path coefficient above the threshold of 0.80 provides support
for convergent validity of the formative construct.
2.The next step is to examine the collinearity of the indicators. SmartPLS software
does not do this. SPSS or some other software must be used.
3.The third step is to examine the statistical significance of the outer weights (not
the loadings). This is done with the bootstrapping option of SmartPLS. Results for
our Corporate Reputation example indicate that all formative indicators are significant
except csor_2, csor_4, qual_2, and qual_4.
4.If any indicator weights are not statistically significant, then we examine the size
and significance of the indicator loadings. The SmartPLS default report provides
the outer loadings and t values. The lowest loading for the four non-significant
indicator weight is 0.57, and all t values are above 2.57, which indicates all four outer
loadings are significant (<0.01). Moreover, prior research and theory also provide
support for the relevance of these indicators for capturing the corporate social
responsibility and quality dimensions of corporate reputation. We therefore retain the
indicators in the formative constructs even though their outer weights are not
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significant.
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Testing Convergent Validity Formative Constructs

The next two slides show the findings of the redundancy
analysis for the four formative constructs in our SEM model.
The first model shows the results for the redundancy
analysis for the ATTR construct. The original formative construct is
labeled with ATTR_F, whereas the global assessment of the
companys attractiveness using a single-item construct is labeled
with ATTR_G. As can be seen, this analysis yields a path coefficient
of 0.87, which is above the threshold of 0.80, thus providing support
for the formative constructs convergent validity.
The redundancy analyses of the remaining formative
constructs (CSOR, PERF & QUAL) yield estimates of 0.86, 0.81,
and 0.81, respectively.
Thus, all formatively measured constructs have sufficient
degrees of convergent validity.
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Testing Collinearity of
Indicators
The SmartPLS software does not provide users with

The SmartPLS software does not provide users with

the tolerance and the VIF values. Statistical software
packages such as R, IBM SPSS Statistics, or Statistica,
however, have collinearity statistics in their linear regression
modules. We will use the Full Data file that has been
converted to SPSS format. To convert, open the Full Data.csv
file with SPSS and use the Import Wizard (be sure to specify
that the top Row contains the variable names).
After converting the data file into SPSS format run a
multiple regression with the formative indicators of a specific
formative construct as independent variables and any other
indicator, which is not included in that specific measurement
model, as the dependent variable (otherwise, it does not
matter which indicator serves as the dependent variable).
With the exception of the collinearity analysis, the
results of the regression analysis do not matter and are not
further analyzed. The only result that is important for
assessing collinearity issues is the VIF (or tolerance) value.

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This is the SPSS linear regression output.

The dependent variable is csor_1 and the
three independent variables are attr_, attr_2,
and attr_3. Note that all of the VIF
numbers are slightly above 1, and all well
below the threshold value of 5.

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Collinearity results for other formative construct

indicators are shown in Exhibit 5.22
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Check to make sure correct

options are selected.
No Sign Changes
Correct number of cases =
sample size
5,000 samples

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Statistical Significance of Outer Weights

Formative Constructs

Based on the t statistics, all formative

indicators are significant except csor_2,
csor_4, qual_2, and qual_4.
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Checking Outer Loadings of non-significant

Formative Construct Indicators

The lowest outer loadings of

these four indicators are 0.5715
= csor_2 and 0.5667 = qual_2
(note: these values will change
slightly with bootstrapping), and
all t values are clearly above
2.57, which indicates the
significance of their outer
loadings (p < .01).
These results provide support
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for retaining
these items.
permission from Sage, Prentice-Hall, McGraw-Hill, SmartPLS, and session presenters.

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