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Evaluation of Formative Measurement Models
Joseph F. Hair (University of South Alabama), G. Tomas M. Hult (Michigan State University), Christian M. Ringle (Hamburg University of Technology), Marko Sarstedt (Babeș-Bolyai University, Otto-von-Guericke-Universität Magdeburg), Nicholas Patrick Danks (Trinity College Dublin), Soumya Ray (National Tsing Hua University)
Abstract: Abstract PLS-SEM is the preferred approach when formatively specified constructs are included in the PLS path model. In this chapter, we discuss the key steps for evaluating formative measurement models. These include the assessment of (1) convergent validity, (2) indicator collinearity, and (3) statistical significance and relevance of the indicator weights. We introduce key criteria and their thresholds and illustrate their use with an extended version of the corporate reputation model estimated with SEMinR.