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2
i
= squared loadings of indicator i of a latent variable
var(c
i
) = squared measurement error of indicator i
Composite Reliability (CR)
Composite reliability should be 0.7 or higher
to indicate adequate convergence or internal
consistency (Gefen et al., 2000).
i
= loadings of indicator i of a latent variable
c
i
= measurement error of indicator i
j = flow index across all reflective measurement model
Cronbach Alpha (o)
Cronbach alpha values should be 0.7 or
higher to indicate adequate convergence or
internal consistency. (Nunnally, 1978)
N = number of indicators assigned to the factor
o
2
i
= variance of indicator i
o
2
t
= variance of the sum of all assigned indicators scores
j = flow index across all reflective measurement model
Discriminant Validity
Fornell & Larcker (1981) criterion
A latent variable should explain better the variance
of its own indicators than the variance of other latent
variables
The AVE of a latent variable should be higher than
the squared correlations between the latent variable
and all other variables. (Chin, 2010; Chin 1998b;
Fornell & Larcker, 1981).
Discriminant Validity
The square root of the Average Variance Extracted
(AVE) that exceeds the intercorrelations of the construct
with the other constructs in the model to ensure
discriminant validity (Chin, 2010; Chin 1998b; Fornell &
Larcker, 1981).
Example:
Discriminant Validity
Assessment of Formative Measurement
Models
Expert validity (Anderson
& Gerbing, 1991)
Sa = substantive agreement
Sv = substantive validity
Indicator relevance
Indicator significance
Multicollinearity
External Validity
Strong and
Significant
Formative Reflective
Does the measure of a construct correlate highly with a second, different
measure of the construct
Does a construct behave within a nomological net as stated by theory?
Higher order constructs
A number of recent papers have presented second
order construct models.
Higher level of abstraction?
Higher Order Constructs
When using higher order constructs, several
issues need to be considered.
The most important is the purpose of the
model:
Often the initial answer is that a good model
demonstrates that a general, more global factor
exists that explains the first order factors.
Is this second order factor expected to
mediate fully the relationship of the first order
factors when applied in a theoretical model?
There are 4 possible types of second-order constructs.
Confirmatory Factor Analysis Stages
Stage 1: Defining Individual Constructs
Stage 2: Developing the Overall Measurement Model
Stage 3: Designing a Study to Produce Empirical Results
Stage 4: Assessing the Measurement Model Validity
Stage 5: Specifying the Structural Model
Stage 6: Assessing Structural Model Validity
Note: CFA involves stages 1 4 above. SEM is stages 5 and 6.
Stage 1: Defining Individual
Constructs
List constructs that will comprise the
measurement model.
Determine if existing scales/constructs
are available or can be modified to test
your measurement model.
If existing scales/constructs are not
available, then develop new scales.
Defining Individual Constructs
All constructs must display adequate construct validity,
whether they are new scales or scales taken from
previous research. Even previously established scales
should be carefully checked for content validity.
Content validity should be of primary importance and
judged both qualitatively (e.g., experts opinions) and
empirically (e.g., unidimensionality and convergent
validity).
A pre-test should be used to purify measures prior to
confirmatory testing.
Stage 2: Developing the Overall
Measurement Model
Key Issues . . .
Unidimensionality no cross loadings
Congeneric measurement model no
covariance between or within construct error
variances
Items per construct identification
Reflective vs. formative measurement models
Stage 2: A Congeneric Measurement
Model
Compensation
X
1
X
2
X
3
X
4
e
1
e
2
e
3
e
4
L
x1
L
x 2
L
x
3
L
x 4
Teamwork
X
5
X
6
X
7
X
8
e
5
e
6
e
7
e
8
L
x 5
L
6
L
x
7
L
x 8
Each measured variable is related to exactly one construct.
Developing the Overall Measurement
Model
In standard CFA applications testing a
measurement theory, within and between error
covariance terms should be fixed at zero and
not estimated.
In standard CFA applications testing a
measurement theory, all measured variables
should be free to load only on one construct.
Developing the Overall Measurement
Model
Latent constructs should be indicated by at least
three measured variables, preferably four or
more. In other words, latent factors should be
statistically identified.
Formative factors are not latent and are not
validated as are conventional reflective factors.
As such, they present greater difficulties with
statistical identification and should be used
cautiously.
Key Issues . . .
Measurement scales in CFA
SEM/CFA and sampling
Specifying the model:
o Which indicators belong to each
construct?
o Setting the scale to 1 for one indicator
on each construct
Stage 3: Designing a Study to
Produce Empirical Results
Stage 4: Assessing Measurement
Model Validity
Key Issues . . .
Assessing fit GOF and path estimates
(significance and size)
Construct validity
Diagnosing problems
o Standardized residuals
o Modification indices
o Specification searches
Assessing Measurement Model Validity
Loading estimates can be statistically significant
but still be too low to qualify as a good item
(standardized loadings below |.5|). In CFA,
items with low loadings become candidates
for deletion.
Completely standardized loadings above +1.0
or below -1.0 are out of the feasible range and
can be an important indicator of some problem
with the data.
Assessing Measurement Model Validity
Typically, standardized residuals less than
|2.5| do not suggest a problem.
o Standardized residuals greater than |4.0|
suggest a potentially unacceptable degree of
error that may call for the deletion of an
offending item.
o Standardized residuals between |2.5| and
|4.0| deserve some attention, but may not
suggest any changes to the model if no other
problems are associated with those items.
Assessing Measurement Model
Validity
The researcher should use the modification indices only
as a guideline for model improvements of those
relationships that can theoretically be justified.
Specification searches based on purely empirical
grounds are discouraged because they are inconsistent
with the theoretical basis of CFA and SEM.
CFA results suggesting more than minor modification
should be re-evaluated with a new data set (e.g., if more
than 20% of the measured variables are deleted, then
the modifications can not be considered minor).
Attitudes
toward
Coworkers
JS4
JS3
JS5
JS2
JS1
OC1
OC2 OC3
OC4
AC3 AC2 AC4 AC1
SI2
SI3
SI1
SI4
EP2 EP1 EP3
Note: Measured variables are shown as a box with labels corresponding to those shown in the HBAT questionnaire. Latent
constructs are an oval. Each measured variable has an error term, but the error terms are not shown. Two headed
connections indicate covariance between constructs. One headed connectors indicate a causal path from a construct to an
indicator (measured) variable. In CFA all connectors between constructs are two-headed covariances / correlations.
EP4
Organizational
Commitment
Staying
Intentions
Job
Satisfaction
Environmental
Perceptions
Measurement Theory Model CFA
Structural Model
JS
OC
SI
EP
AC
Hypotheses:
H1: EP + JS
H2: EP + OC
H3: AC +JS
H4: AC +OC
H5: JS + OC
H6: JS + SI
H7: OC +SI
Note: observable indicator variables are not shown to simplify the model.
Moderator Variable
A moderator specifies the conditions
under which a given effect occurs, as
well as the conditions under which the
direction or strength of an effect vary.
Baron and Kenny (1986, pp. 1174, 1178)
describe a moderator variable as the
following:
Moderator Variable
A qualitative (e.g., sex, race, class) or quantitative
variable . . . that affects the direction and/or strength
of a relation between an independent or predictor
variable and a dependent or criterion variable . . . a
basic moderator effect can be presented as an
interaction between a focal independent variable and a
factor (the moderator) that specifies the appropriate
conditions for its operation . . .Moderator variables are
typically introduced when there is an unexpectedly
weak or inconsistent relation between a predictor and
a criterion variable.
Moderator Variable
A moderator variable is one that affects the
relationship between two variables, so that the
nature of the impact of the predictor on the
criterion varies according to the level or value
of the moderator (Holmbeck, 1997).
A moderator interacts with the predictor
variable in such a way as to have an impact on
the level of the dependent variable.
Mediator Variable
A mediator specifies how (or the
mechanism by which) a given effect
occurs (Baron & Kenny, 1986; James &
Brett, 1984). Baron and Kenny (1986,
pp. 1173, 1178) describe a mediator
variable as the following:
Mediator Variable
The generative mechanism through
which the focal independent variable is
able to influence the dependent variable
of interest . . . (and) Mediation . . . is best
done in the case of a strong relation
between the predictor and criterion
variable.
Mediator Variable
Shadish and Sweeney (1991) stated that
the independent variable causes the
mediator which then causes the
outcome. Also critical is the prerequisite
that there be a significant association
between the independent variable and
the dependent variable before testing for
a mediated effect.
Mediator Effect
According to McKinnon et al, (1995),
mediation is generally present when:
1. the IV significantly affects the mediator,
2. the IV significantly affects the DV in the absence
of the mediator,
3. the mediator has a significant unique effect on the
DV, and
4. the effect of the IV on the DV shrinks upon the
addition of the mediator to the model.
Mediator Variable
Baron & Kenny (1986) has formulated the steps and
conditions to ascertain whether full or partial mediating
effects are present in a model.
Independent
Mediator
Dependent
a
b
c
Mediator Analysis
Judd and Kenny (1981), a series of regression
models should be estimated. To test for
mediation, one should estimate the three
following regression equations:
1. regressing the mediator on the independent
variable;
2. regressing the dependent variable on the
independent variable;
3. regressing the dependent variable on both the
independent variable and on the mediator.
Mediator Analysis
1) variations in levels of the independent variable
significantly account for variations in the presumed
mediator (i.e., Path c),
2) variations in the mediator significantly account for
variations in the dependent variable (i.e., Path b), and
3) when Paths a and b are controlled, a previously
significant relation between the independent and
dependent variables is no longer significant, with the
strongest demonstration of mediation occurring when
Path c is zero.
Mediator Analysis
Separate coefficients for each equation
should be estimated and tested.
There is no need for hierarchical or
stepwise regression or the computation
of any partial or semipartial correlations.