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Information and communications technology (ICT) offers enormous opportunities for individuals, businesses and society. The application of ICT is equally important to economic and non-economic activities. Researchers have increasingly focused on the adoption and use of ICT by small and medium enterprises (SMEs) as the economic development of a country is largely dependent on them. Following the success of ICT utilisation in SMEs in developed countries, many developing countries are looking to utilise the potential of the technology to develop SMEs. Past studies have shown that the contribution of ICT to the performance of SMEs is not clear and certain. Thus, it is crucial to determine the effectiveness of ICT in generating firm performance since this has implications for SMEs’ expenditure on the technology. This research examines the diffusion of ICT among SMEs with respect to the typical stages from innovation adoption to post-adoption, by analysing the actual usage of ICT and value creation. The mediating effects of integration and utilisation on SME performance are also studied. Grounded in the innovation diffusion literature, institutional theory and resource-based theory, this study has developed a comprehensive integrated research model focused on the research objectives. Following a positivist research paradigm, this study employs a mixed-method research approach. A preliminary conceptual framework is developed through an extensive literature review and is refined by results from an in-depth field study. During the field study, a total of 11 SME owners or decision-makers were interviewed. The recorded interviews were transcribed and analysed using NVivo 10 to refine the model to develop the research hypotheses. The final research model is composed of 30 first-order and five higher-order constructs which involve both reflective and formative measures. Partial least squares-based structural equation modelling (PLS-SEM) is employed to test the theoretical model with a cross-sectional data set of 282 SMEs in Bangladesh. Survey data were collected using a structured questionnaire issued to SMEs selected by applying a stratified random sampling technique. The structural equation modelling utilises a two-step procedure of data analysis. Prior to estimating the structural model, the measurement model is examined for construct validity of the study variables (i.e. convergent and discriminant validity).

The estimates show cognitive evaluation as an important antecedent for expectation which is shaped primarily by the entrepreneurs’ beliefs (perception) and also influenced by the owners’ innovativeness and culture. Culture further influences expectation. The study finds that facilitating condition, environmental pressure and country readiness are important antecedents of expectation and ICT use. The results also reveal that integration and the degree of ICT utilisation significantly affect SMEs’ performance. Surprisingly, the findings do not reveal any significant impact of ICT usage on performance which apparently suggests the possibility of the ICT productivity paradox. However, the analysis finally proves the non-existence of the paradox by demonstrating the mediating role of ICT integration and degree of utilisation explain the influence of information technology (IT) usage on firm performance which is consistent with the resource-based theory. The results suggest that the use of ICT can enhance SMEs’ performance if the technology is integrated and properly utilised. SME owners or managers, interested stakeholders and policy makers may follow the study’s outcomes and focus on ICT integration and degree of utilisation with a view to attaining superior organisational performance.

This study urges concerned business enterprises and government to look at the environmental and cultural factors with a view to achieving ICT usage success in terms of enhanced firm performance. In particular, improving organisational practices and procedures by eliminating the traditional power distance inside organisations and implementing necessary rules and regulations are important actions for managing environmental and cultural uncertainties. The application of a Bengali user interface may help to ensure the productivity of ICT use by SMEs in Bangladesh. Establishing a favourable national technology infrastructure and legal environment may contribute positively to improving the overall situation. This study also suggests some changes and modifications in the country’s existing policies and strategies. The government and policy makers should undertake mass promotional programs to disseminate information about the various uses of computers and their contribution in developing better organisational performance. Organising specialised training programs for SME capacity building may succeed in attaining the motivation for SMEs to use ICT. Ensuring easy access to the technology by providing loans, grants and subsidies is important. Various stakeholders, partners and related organisations should come forward to support government policies and priorities in order to ensure the productive use of ICT among SMEs which finally will help to foster Bangladesh’s economic development.

Since the publication of Venkatraman and Grant's (1986) article two decades ago, considerably more attention has been directed at establishing the validity of constructs in the strategy literature. However, recent developments in measurement theory indicate that strategy researchers need to pay additional attention to whether their constructs should be modeled as having formative or reflective indicators. Therefore, the purpose of this chapter is to highlight the differences between formative and reflective indicator measurement models, and discuss the potential role of formative measurement models in strategy research. First, we systematically review the literature on construct measurement model specification. Second, we assess the extent of measurement model misspecification in the recent strategy literature. Our assessment of 257 constructs in the contemporary strategy literature suggests that many important strategy constructs are more appropriately modeled as having formative indicators than as having reflective indicators. Based on this review, we identify some common errors leading to measurement model misspecification in the strategy domain. Finally, we discuss some implications of our analyses for scholars in the strategic management field.

To clarify the nature of the error term in formative measurement models, as it had been misinterpreted in prior research.

The error term in formative measurement models is analytically contrasted with the measurement errors typically found in reflective measurement models.

It is demonstrated that, unlike in reflective measurement, the error term in formative models is not measurement error but rather a disturbance representing non‐modeled causes. It is also shown that, under certain circumstances, the inclusion of an error term is not necessary/appropriate.

Focus is only on first‐order measurement models; higher‐order specifications are not considered.

The paper helps researchers in their initial specification of formative measurement models as well as their evaluation of the subsequent model estimates, leading to better specifications for formative constructs.

Purpose – Despite the increasing use of formative measurement models in literature, little is known about potential consequences for substantive theory testing. Against this background, the aims of this chapter are (1) to highlight some problems that may arise when formative instead of reflective measures are used to test even simple theoretical models with covarianced-based methodologies, (2) to illustrate some approaches that might help overcome these problems, (3) to pinpoint potential interpretation difficulties of the results involving re-specified measurement models, and (4) to stimulate discussion on the implications for theory development when models are tested with formative measures.

Methodology/approach – Potential consequences of formative measurement models for theory testing are highlighted using an empirical study on consumer animosity as an illustrative example and applying covarianced-based structural equations modeling procedures for estimation purposes.

Findings – The empirical study shows (a) that some scaling options for the (composite) latent variable result in non-convergence problems, (b) that, assuming convergence, parameter estimates, standard errors, and significance levels vary depending on the scaling method used, and (c) that goodness-of-fit statistics cannot be used as diagnostic measures for the appropriateness of divergent results.

Originality/value of paper – The contribution of this chapter is two-fold: First, it shows that to enable estimation, it is often necessary to modify (i.e., expand) the original theoretical model in a conceptually reasonable manner and to do so before data collection. Second, it demonstrates that alternative scaling options for composite latent variables may result in inconsistent substantive conclusions. Consequently, the impact of formative measurement on theory testing is a critical topic and needs to receive further attention in future literature.

Entrepreneurial orientation (EO) has emerged as a core concept in the field of entrepreneurship. Yet, there continue to be questions about the nature of EO and how best to conceptualize and measure it. This chapter makes the case that EO has grown beyond its roots as a firm-level unidimensional strategy construct and that a new multidimensional version of EO is needed to capture the diverse manifestations and venues for entrepreneurial activity that are now evident around the world – global entrepreneurial orientation (GEO). Building on the five-dimension multidimensional view of EO set forth when Lumpkin and Dess (1996) extended the work of Miller (1983) and Covin and Slevin (1989, 1991), the chapter offers an updated definition of EO and a fresh interpretation of why EO matters theoretically. Despite earnest efforts to reconcile the different approaches to EO, in order to move the study of EO and the theoretical conversation about it forward, we maintain that as a group of scholars and a field, we need to acknowledge that two different versions of EO have emerged. Given that, we consider original approaches to measuring EO, evaluate formative measurement models, consider multiple levels of analysis, call for renewed attention to EO configurations, and discuss whether there is a theory of EO.

While the conceptualization and operationalization of export performance has been receiving increased attention in the literature, practically all multi‐item measures of export performance available are based on reflective (effect) indicators. Explores an alternative measurement approach based on formative (causal) indicators and examines the implications of constructing an index rather than a scale of export performance. The aim is to assist researchers in choosing the appropriate measurement model for their needs when conducting substantive export performance studies.

This paper aims to respond to claims by Collier and Bienstock and Rossiter that reflective measurement is wrong for internet retailing service quality (IRSQ). The research empirically assesses Rossiter's proposal that the C‐OAR‐SE procedure for index development will generate a more valid way to measure IRSQ than is otherwise available.

C‐OAR‐SE is used to develop a formative IRSQ index. The index is administered to internet shoppers in an online survey. The index is compared with an existing IRSQ scale in terms of content, parsimony, measurement scores and criterion validity.

The scale and index display parity in content, parsimony and measurement scores, while the scale shows higher criterion validity. The results contradict Rossiter's claims and foster doubt regarding the usefulness of C‐OAR‐SE's formative measurement procedures.

IRSQ can be conceptualised as reflective or formative, but C‐OAR‐SE does not necessarily generate a better way to measure the construct. Furthermore, implementing C‐OAR‐SE unearths problems with the procedure.

Multiple variations of IRSQ exist, as well as multiple views on how to measure the variations and differing degrees to which the variations are actually measured. Crucially, the situation is not as bleak as Collier and Bienstock or Rossiter suggest: the literature does offer sound, valid IRSQ measurement scales.

The paper resolves unwarranted criticisms of IRSQ scales, highlights the limitations with some scales, offers the first complete example of using C‐OAR‐SE to develop a new index and lends applied support to theoretical criticisms of C‐OAR‐SE.

The purpose of this paper is to test the properties of the well-known three-dimensional adjustment scale, established by Black et al. (1988, 1989), namely, its dimensionality and internal consistency. The theoretical basis of the construct is discussed in relation to formative and reflective measurement approaches.

Two different ways of organizing the adjustment items (random/non-random) were used to assess the internal consistency of the three-dimensional adjustment scale. The quantitative analysis presented is based on survey data from 468 assigned expatriates in Asia that were subjected to an exploratory and confirmatory factor analysis as well as a structural equation modeling – more specifically the multiple indicators multiple causes model (MIMIC).

The study revealed that the adjustment construct is possibly misspecified, especially the general adjustment dimension, that was tested as a formative, not a reflective scale. There is further evidence that the wrong measurement approach skewed the coefficient that connects adjustment to performance, which is the key construct in its nomological network. Moreover, the dimensionality and the internal consistency of the scale are deteriorated to a large extent by randomization of the items. The findings highlight the need for a clear concept definition that would lead to an appropriate operationalization of the construct.

The study is one of the few rigorously testing the properties of a construct that has been used for almost 30 years, thus yielding some novel conclusions about its stability and consistency.

The purpose of this paper is to provide an understanding of the issues related to formative modeling and the implications for its use, including some practical suggestions on methods for utilizing causal indicators within models.

In order to understand and explore the issues relating to formative models, this paper explores both formative and reflective indicators that together address the basic approach to the causal relationship within measurement models in structural equations modeling. Process recommendations for formative model/variable conceptualization and development are presented as well as a discussion of several evaluative issues including identification and proportionality. Some of the main arguments for and against its use are also discussed.

While the literature on formative models stresses its contribution to behavioral sciences, perhaps its greatest contribution is the flexibility of choice that it provides researchers in the development of models to more accurately estimate the relationship under consideration.

The paper contributes to the on-going debate on the relative advantages and disadvantages of the formative and reflective approaches to modeling and examination. Although the pendulum has swung in recent years away from an almost singular focus on reflective models, both approaches provide useful and complementary tools to theoretical management research modeling.

The purpose of this study is to review the use of partial least squares-structural equation modeling (PLS-SEM) in the field of hospitality and tourism and thereby to assess whether the PLS-SEM-based papers followed the recommended application guidelines and to investigate whether a comparison of journal types (hospitality vs tourism) and journal qualities (top-tier vs other leading) reveal significant differences in PLS-SEM use.

A total of 206 PLS-SEM based papers published between 2000 and April 2017 in the 19 SSCI-indexed hospitality and tourism journals were critically analyzed using a wide range of guidelines for the following aspects of PLS-SEM: the rationale of using the method, the data characteristics, the model characteristics, the model assessment and reporting the technical issues.

The results reveal that some aspects of PLS-SEM are correctly applied by researchers, but there are still some misapplications, especially regarding data characteristics, formative measurement model evaluation and structural model assessment. Furthermore, few significant differences were found on the use of PLS-SEM between the two fields (hospitality and tourism) and between the journal tiers (top-tier and other leading).

To enhance the quality of research in hospitality and tourism, the present study provides recommendations for improving the future use of PLS-SEM.

The present study fills a sizeable gap in hospitality and tourism literature and extends the previous assessments on the use of PLS-SEM by providing a wider perspective on the issue (i.e. includes both hospitality and tourism journals rather than the previous reviews that focus on either tourism or hospitality), using a larger sample size of 206 empirical studies, investigating the issue over a longer time period (from 2000 to April, 2017, including the in-press articles), extending the scope of criteria (guidelines) used in the review and comparing the PLS-SEM use between the two allied fields (hospitality and tourism) and between the journal tiers (top-tier and other leading).