Nature of Research

Types of Analysis

VB-SEM vs CB-SEM

Reasons of Using PLS (Chin, 1998; Chin & Newsted, 1999)

• The phenomenon to be investigated is relatively new & measurement models need to be newly developed.
• The structural equation model is complex with a large number of latent variables & manifest variables.
• Relationships between the indicators and latent variables have to be modeled in different modes (i.e., formative & reflective).
• The conditions relating to sample size & normal distribution are not met.
• Prediction is more important than parameter estimation.

In situations where prior theory is strong and further testing and development are the goal, CB-SEM is more appropriate.

However, for application & prediction, when the phenomenon under research is relatively new or changing, or when the theoretical model or measures are not well formed, a PLS approach is often more suitable (Chin& Newsted, 1999)

Misuse of SEM Approach

Data characteristics are among the most often stated reasons for applying PLS-SEM (Hair et al., 2017; Henseler et al., 2015).

Small sample size is the most often abused argument associated with the use of PLS-SEM (Goodhue et al., 2012; Marcoulides & Saunders, 2006).

Further Readings

Hair Jr, J. F., Matthews, L. M., Matthews, R. L., & Sarstedt, M. (2017). PLS-SEM or CB-SEM: updated guidelines on which method to use. International Journal of Multivariate Data Analysis, 1(2), 107-123. Click here.

Astrachan, C. B., Patel, V. K., & Wanzenried, G. (2014). A comparative study of CB-SEM and PLS-SEM for theory development in family firm research. Journal of Family Business Strategy, 5(1), 116-128. Click here.

Chin, W. W., & Newsted, P. R. (1999). Structural equation modeling analysis with small samples using partial least squares. Statistical strategies for small sample research, 1(1), 307-341. Click here.