Ringle, Christian M. and Götz, Oliver and Wetzels, Martin and Wilson, Bradley (2009): On the Use of Formative Measurement Specifications in Structural Equation Modeling: A Monte Carlo Simulation Study to Compare CovarianceBased and Partial Least Squares Model Estimation Methodologies. Published in: Research Memoranda from Maastricht (METEOR)

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Abstract
The broader goal of this paper is to provide social researchers with some analytical guidelines when investigating structural equation models (SEM) with predominantly a formative specification. This research is the first to investigate the robustness and precision of parameter estimates of a formative SEM specification. Two distinctive scenarios (normal and nonnormal data scenarios) are compared with the aid of a Monte Carlo simulation study for various covariancebased structural equation modeling (CBSEM) estimators and various partial least squares path modeling (PLSPM) weighting schemes. Thus, this research is also one of the first to compare CBSEM and PLSPM within the same simulation study. We establish that the maximum likelihood (ML) covariancebased discrepancy function provides accurate and robust parameter estimates for the formative SEM model under investigation when the methodological assumptions are met (e.g., adequate sample size, distributional assumptions, etc.). Under these conditions, MLCBSEM outperforms PLSPM. We also demonstrate that the accuracy and robustness of CBSEM decreases considerably when methodological requirements are violated, whereas PLSPM results remain comparatively robust, e.g. irrespective of the data distribution. These findings are important for researchers and practitioners when having to choose between CBSEM and PLSPM methodologies to estimate formative SEM in their particular research situation.
Item Type:  MPRA Paper 

Original Title:  On the Use of Formative Measurement Specifications in Structural Equation Modeling: A Monte Carlo Simulation Study to Compare CovarianceBased and Partial Least Squares Model Estimation Methodologies 
Language:  English 
Keywords:  PLS, path modeling, covariance structure analysis, structural equation modeling, formative measurement, simulation study 
Subjects:  C  Mathematical and Quantitative Methods > C1  Econometric and Statistical Methods and Methodology: General > C10  General C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C51  Model Construction and Estimation C  Mathematical and Quantitative Methods > C3  Multiple or Simultaneous Equation Models; Multiple Variables > C30  General C  Mathematical and Quantitative Methods > C1  Econometric and Statistical Methods and Methodology: General > C15  Statistical Simulation Methods: General 
Item ID:  15390 
Depositing User:  Christian M. Ringle 
Date Deposited:  25. May 2009 09:41 
Last Modified:  14. Feb 2013 14:14 
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URI:  http://mpra.ub.unimuenchen.de/id/eprint/15390 