Validating Formative Partial Least Squares (PLS) Models: Methodological Review and Empirical Illustration

Abstract

The issue of formative constructs, as opposed to the more frequently used reflective ones, has recently gained momentum among IS and Management researchers. Most researchers maintain that formative constructs have been understudied, and that there is paucity in methodological literature to guide researchers on how such constructs should be developed and estimated. A survey of IS research has revealed that about 29% of constructs were misspecified as reflective rather than formative constructs. Furthermore, guidelines about how models containing formative constructs should be indentified and estimated are fragmented and inconsistent. Thus, this paper aims to present a methodological review of formative model identification and evaluation. We bring a brief theoretical overview of formative constructs, and put together a guideline for estimating formative measurement and structural models. We then present a simplified model composed of three formative constructs and illustrate how it is assessed and estimated using SmartPLS.