BUSINESS

RESEARCH
METHODS

BUSINESS RESEARCH METHODS - I

 OBJECTIVE
 To familarise the students to the principles
of scientific methodology in business
enquiry; to develop analytical skills of
business research; to develop the skills for
scientific communications

BUSINESS RESEARCH METHODS - I

 OUTCOME
Students would become acquainted with
the scientific methodology in business
domain. They would also become
analytically skillful. They would become
familiar with the nuances of scientific
communications

BUSINESS RESEARCH METHODS - I

 UNIT I
INTRODUCTION
 Business Research – Definition and Significance
– the research process – Types of Research –
Exploratory and causal Research – Theoretical
and empirical Research – Cross –Sectional and
time – series Research – Research questions /
Problems – Research objectives – Research
hypotheses – characteristics – Research in an
evolutionary perspective – the role of theory in
research.

BUSINESS RESEARCH METHODS - I

 UNIT II
RESEARCH DESIGN AND MEASUREMENT
 Research design – Definition – types of research
design – exploratory and causal research design
– Descriptive and experimental design –
different types of experimental design – Validity
of findings – internal and external validity –
Variables in Research – Measurement and
scaling – Different scales – Construction of
instrument – Validity and Reliability of
instrument.

BUSINESS RESEARCH METHODS - I

 UNIT III
DATA COLLECTION
 Types of data – Primary Vs Secondary data –
Methods of primary data collection – Survey Vs
Observation – Experiments – Construction of
questionaire and instrument – Validation of
questionaire – Sampling plan – Sample size –
determinants optimal sample size – sampling
techniques – Probability Vs Non–probability
sampling methods..

BUSINESS RESEARCH METHODS - I

 UNIT IV
DATA PREPARATION AND ANALYSIS
 Data Preparation – editing – Coding –Data entry
– Validity of data – Qualitative Vs Quantitative
data analyses – Bivariate and Multivariate
statistical techniques – Factor analysis –
Discriminant analysis – cluster analysis –
multiple regression and correlation –
multidimensional scaling – Conjoint Analysis -
Application of statistical software for data
analysis.

BUSINESS RESEARCH METHODS - I

 UNIT V
REPORT DESIGN, WRITING AND ETHICS IN
BUSINESS RESEARCH

 Research report – Different types – Contents of

report – need of executive summary –
chapterization – contents of chapter – report
writing – the role of audience – readability –
comprehension – tone – final proof – report
format – title of the report – ethics in research –
ethical behaviour of research – subjectivity and
objectivity in research.

BUSINESS RESEARCH METHODS - I

BUSINESS RESEARCH METHODS - I
 What is Research?
Research is an art of scientific investigation.
It is regarded as a systematic efforts to gain
new knowledge.

The dictionary meaning of research is “a

careful investigation or enquiry especially
through search for new facts in any branch of
knowledge”.
BUSINESS RESEARCH METHODS - I
 Definition
Research comprises defining and
redefining problems, formulating hypothesis
or suggested solutions; collecting,
organizing and evaluating data; making
deductions and reaching conclusions; and
at last carefully testing the conclusions to
determine whether they fit the formulating
hypothesis.
-Clifford Woody
BUSINESS RESEARCH METHODS - I
BUSINESS RESEARCH METHODS - I
BUSINESS RESEARCH METHODS - I
BUSINESS RESEARCH METHODS - I
Curiosity
Quality of
Life
Utility of
Applications
Advancement of
Amount of Technology
knowledge

Application
Development
Applied Research
Basic Research

6
 Objectives of Research

 To investigate a subject.
 To collect data regarding the problem.
 To conduct logical and objective study.
 To conduct a systematic enquiry of the
subject.
 For carefully recording, reporting and
presenting the facts.
 Business research ….
Systematic and objective process of
generating information for aid in making
business decisions.

Business research can be described as a

systematic and organized effort to investigate
a specific problem encountered in the work
setting, which needs a solution.
BUSINESS RESEARCH METHODS - I
 Examples
 A firm wants to produce and market a new product but
first wants to ascertain if there is a potential consumer
demand for this product in markets x,y and z
 A general manager of a car producing company was
concerned with the complaints received from the car
users that the car they produce have some problems with
sound at the dash board and the rear passenger seat
after few thousand kilometers of driving.
 A multinational firm wants to establish a production
facility in another country after determining its technical
and economic feasibility
 A government agency wants to ascertain the satisfaction
level of its employees, the causes for any possible
discontent, and propose a scheme for enhancing this
level
 MNC wants to find out the trends in retail and wholesale
sector
 Nature of Research
 It strives to be objective and logical.
 It is based on observable experience or
empirical evidence.
 It is characterized by patient and unhurried
activity.
 It demands accurate observations,
reservations and descriptions.
Contd…
 It is directed towards the solution of the
problem.
 It is carefully recorded and reported.
 It requires expertise.
 It involves gathering new data from
primary or first hand sources or using
existing data for new purpose.

BUSINESS RESEARCH METHODS - I

 Fields Where Research is Often Used
General Business Conditions and
Financial and Accounting Research
Corporate Research
Forecasts of financial interest rate trends,
 Short- & Long-Range Forecasting,
Stock,bond and commodity value predictions
 Business and Industry Trends
Capital formation alternatives
 Global Environments
Mergers and acquisitions
 Inflation and Pricing
Risk-return trade-offs
 Plant and Warehouse Location
Portfolio analysis
 Acquisitions
Impact of taxes
Research on financial institutions
Expected rate of return
Management and Organizational Capital asset pricing models
Behaviour Research Credit risk
Cost analysis
• Total Quality Management
• Morale and Job Satisfaction
• Leadership Style
• Employee Productivity
• Organizational Effectiveness
• Structural ssues
• Absenteeism and turnover
• Organizational Climate
RESEARCH PROCESS

BUSINESS RESEARCH METHODS - I

BUSINESS RESEARCH METHODS - I
 Step 1 – Selecting the research topic
 Basic Step in research
 Research is possible in Marketing, banking
insurance, transport, export etc
 For e.g.: In marketing we have areas of
research such as product research, price
research, consumer behavior research,
packaging research, promotion research etc.
 Primary decision in a research process is to
select the research area.
Step 2 - Define the research problem
 The second, and the most important step in
research:

 “A problem well-defined is half solved”

 Nature of the problem determines the type of

study to conduct.

 Symptoms, for example, declining sales, profit,

market share, or customer loyalty are not
problems.
 company’s problems may become
apparent from:
 Deviation from the business plan,
 Company records and reports,
 Customer complaints and grievances,
 Conversations with company employees, and
 Observation of inappropriate behavior or conditions
in the firm;
 the success of the firm’s competitors, and
 published materials reporting issues such as,
 changes in market or environmental
trends,
 new government regulations,
 anticipated changes in the economy, etc.
Once the symptoms of a problem are detected..

 Conduct some initial fact finding to determine the

nature of the true problem.

 Talk to others about the problem and conduct a

preliminary literature search on the topic.
 In the initial stage, a problem may be recognized in a
very broad and general form only. This may restrict the
research program from being comprehensively
designed.

 Both the researcher and the marketing manager (or the

research client ) need to work together to formulate the
problem into a precise and definite statement.

 This fact-finding exercise helps the researcher to refine

his educated guess to a more accurate problem
statement.
Step 3: Establish Research Objectives
• “If you do not know what you are looking for, you won’t find it”

• Research objectives are related to and determined by the problem

definition. In establishing research objectives, the researcher must
answer the following questions:
i) What specific information should the project provide?
ii) If more than one type of information will be developed from
the study, which is the most important? and finally,
iii) What are the priorities?

• When specifying research

objectives, development of
hypothesis, might be very
helpful.
• When achieved, objectives
provide the necessary
information to solve the
problem.
 Research Question
1. Why have org’s introduced
team briefing?
2. How can the effectiveness
of team briefing methods be
measured?
3. Has team briefing been
effective?
Research Objective
1. To identify org’s
objectives for team briefing
schemes
2. To establish suitable
effectiveness criteria for
team briefing methods
3.To describe the
effectiveness of team
briefing
Step 4: Research Design
Research Design step involves the development of a
research plan for carrying out the study.
– There are a number of alternative research
designs. The choice will largely depend on the
research purpose.

MARKETING RESEARCH

QUALITATIVE RESEARCH QUANTITATIVE RESEARCH

EXPLORATORY DESCRIPTIVE CAUSAL

Focus Group; Survey research Laboratory Experiment
Observation; Field Experiment
Others.
Step 5: Specify the information required.
After defining the problem the
researcher must determine what kind of
information will best meet the research
objectives.
Secondary information – Information
that is readily available. E.g.
- Internet, Magazines, books,

Primary information – Information that

needs to be found by conducting
Survey, Observation or
experimentation
Step 6: Design the method of
collecting the needed information.
Marketing research information
may be collected in many
ways:

 via mail, telephone, fax,

Internet, or personal
interview.

 using consumer panels,

consisting of individuals
who have agreed to
provide purchasing and
media viewing behavior.
 Step 7: Design the questionnaire
• You need to have a questionnaire to collect
Primary data

• A primary responsibilities of a marketing

researcher is to design the data collection
instrument or questionnaire in a manner so
that it is easily understood by the
respondent and administered to them.
Step 8: Decide on the sampling design.
Selecting the target audience
The researcher must determine the criteria that
would enable a respondent to take part in a
study.

The sampling design must result in the proper sample of

respondents being selected. Different sampling designs
are available to researchers.
Step 9: Manage and implement the data
collection.
The researcher must properly manage and oversee
the data collection process.

 If interview method is used, the researcher must train

interviewers and develop procedures for controlling the
quality of the interviewing.

 [This is not necessary if survey methodology is used, where

the research instruments are completed by the
respondents. ]
Step 10: Analyze and interpret the
results.
The ‘raw’ research data needs to be edited,
tabulated and analyzed to find the results and to
interpret them.
– the method used may be manual or computer based.
– The analysis plan follows from the research objective of
the study.
– Association and relationships of variables are identified
and discussed in the light of the specific marketing
problem.
Step 11: Communicate the findings
and implications
 The researcher has to submit a written report and
often make an oral presentation to management or
the client.
 In conducting all the marketing research activities; the
marketing researchers must adhere to ethical standards.
 Significance of Research
 It provides the basis for nearly all
government policies in our economic
system.
 It helps in solving various operational and
planning problems of business and
industry.
 It is an aid to decision making.
 It establishes the relation between
variables.
BUSINESS RESEARCH METHODS - I
Contd…

 It is equally important for social scientists

in studying social relationships and in
seeking answers to various social
problems.
 It provides a basis for innovation.
 It facilitates the process of thinking,
analysis, evaluation and interpretation of
various situation.

BUSINESS RESEARCH METHODS - I

 Hallmarks of Scientific Research

1- Purposiveness 5- Precision
2- Rigor 6- Objectivity
3- Testability 7- Generalizability
4- Replicability 8- Parsimony

Consider the case of a manager of P&G who is interested in

investigating how employees` commitment to the organization can be
increased.
 Purposiveness
 Research must be started with a definite, clear aim,
objective and purpose.

 Research findings must be beneficial for organization.

For example an increase in employee commitment will be

beneficial for organization

 It will translate into less turnover, less absenteeism, and

increased performance levels .
 Rigor
 Rigor connotes carefulness during research.

 It also refers to degree of exactitude in research investigations.

 Chosen sample should be true representative of whole

organization.

 Method adopted for collecting data should be appropriate.

 Research process should be free from personal and emotional

biases.
Testability

 Testability refers that hypothesis must be testable.

 Hypotheses are tentative yet testable statements.

 They are derived from theory or theory based.

 It must be able to testify by applying certain statistical tests

experimentally.
 Replicability

 Results should be supported again and again when the same type
of research is repeated in other similar circumstances.

 Replicability will gain confidence in the scientific nature of our

research.

 Replicability brings exactitude and accuracy in research findings.

 Precision and Confidence

 Precision refers to the closeness of the findings to

reality.

 Precision reflects the degree of accuracy of the results .

 We ensures that our findings are close to reality.

 So that we can place reliance or confidence in the results.

 In social sciences confidence level is 95%.

 Objectivity
 The conclusions drawn from information
should be objective.

 The findings should be based on the facts .

 The more objective the interpretation of the

data, the more scientific the research
investigation becomes.
Generalizability

 Generalizability refers to the scope of

applicability of the research findings in one
organizational setting to other settings.

 The wider the range of applicability of the

solutions generated by research, the more
useful the research is to the users.
Parsimony
 Parsimony refers to simplicity in explaining the
phenomena or problems that occur.
 It is Level of understanding in generating solutions for
the problems.
 Economy in research models is achieved when we can
build a lesser number of variables.
 Those variables would explain the variance far more
efficiently than a complex set of variables.
 Criteria for Good Research
 Purpose should be clearly defined.
 Common concepts should be used that
can be understood by all.
 Research procedure should be explained
in detail.
 Research design should be carefully
planned.
 Researcher should declare all the
possible errors and their possible impact
on finding. BUSINESS RESEARCH METHODS - I
Contd…

 Analysis of data should be sufficiently

adequate to reveal significance.
 The methods of analysis should be
appropriate.
 The validity and reliability of the data
should be checked carefully.
 The researcher have good command over
research methodologies and should be
intelligent and experience.

BUSINESS RESEARCH METHODS - I

 Limitations of Research
 It is based on sample & sampling research lacks
the complete accuracy.
 Long time is required in the research
procedures.
 Difficult to evaluate the economic benefits
derived from the research.
 Trained personnel and a lot of time are required
for research.
 Lack of adequate knowledge of research.

BUSINESS RESEARCH METHODS - I

 Descriptive
Historical
Research
Research
Fundamental
Research Applied
Research

Types of
Empirical
Research Research Conceptual
Research

Analytical
Qualitative
Research Quantitative Research
Research

BUSINESS RESEARCH METHODS - I

Descriptive Research
 Surveys and fact finding enquiries of
different kinds
 Purpose is the description of the state of
affairs as it exists in present
 Ex Post Facto Research
 Researcher has no control over the
variables; he can only report what has
happened or what is happening
Subdivisions of Descriptive
Research
 Survey Research
 The Case Study
 Correlational Study
 Comparative Study
 Analytical Research

 Involves in-depth study and

evaluation of available
information in an attempt to
explain complex phenomenon
• The researcher has to use facts or
information already available and analyze
these to make a critical evaluation of the
material
Subdivisions of Analytical
Research
 Historical Research
 Philosophical Research
 Review
 Research synthesis (meta analysis i.e.
analysis of the review already published)
Applied / Action Research
 Finding a solution to an immediate
problem
 Research aimed to find social or political
trends that may affect a particular
institution is an example of applied
research

 Subtypes
 Marketing Research
 Evaluation Research
Basic / Pure / Fundamental
Research
 Concerned with generalizations and with
the formulations of a theory
 Natural phenomenon and mathematics are
examples of basic research
 Finding information that has a broad base
of application
Cross-Sectional Design
 A cross-sectional design is used for research that
collects data on relevant variables one time only
from a variety of people, subjects, or phenomena.

 A cross-sectional designs provides a snapshot of

the variables included in the study, at one
particular point in time.

 Cross-sectional designs generally use survey

techniques to gather data, for example, the U.S.
Census.
 Advantages: data on many variables, data from a large
number of subjects, data from dispersed subjects, data
on attitudes and behaviors, good for exploratory
research, generates hypotheses for future research, data
useful to many different researchers

 Disadvantages: increased chances of error, increased

cost with more subjects and each location, cannot
measure change, cannot establish cause and effect, no
control of independent variable, difficult to rule out rival
hypotheses, static
Longitudinal

 A longitudinal design collects data over

long periods of time.
 Measurements are taken on each
variable over two or more distinct time
periods.
 This allows the researcher to measure
change in variables over time.
 Time Series Design

 A Time Series Design collects data on the same

variable at regular intervals in the form of
aggregate measures of a population.

 Time series designs are useful for:

 establishing a baseline measure
 describing changes over time
 keeping track of trends
 forecasting future (short term) trends
THEORETICAL AND EMPIRICAL
RESEARCH
Theoretical research generally uses the findings from
existing works to develop new ideas through analysing
existing theory and explanations. These new ideas are not
tested through collecting evidence in the form of primary
data.

Empirical research supports the development of new ideas

through the collection of data (empirical = observation or
measurement rather than theoretical reasoning).
Quantitative Research
 Based on measurement of quantity or
amount
 Weighing, measuring are examples of
quantitative research
Qualitative Research
 Phenomena relating to quality or kind
 Character, personality and mankind are
examples of variables used to measure
qualitative research
 Word association test, sentence
completion test
Conceptual / Experimental Research

 Related to some abstract idea or theory

 To develop new concepts or to reinterpret
existing ones
 Attempt to establish cause and effect
relationship
 HISTORICAL RESEARCH
Historical research is research involving analysis of events
that occurred in the remote or recent past
Application
• Historical research can show patterns that occurred in the past and over time
which can help us to see where we came from and what kinds of solutions we
have used in the past.
• Understanding this can add perspective on how we examine current events and
educational practices.

The steps involved in the conduct of historical research

Here are the five steps:
1. Identification of the research topic and formulation of the research problem or
question.
2. Data collection or literature review
3. Evaluation of materials
4. Data synthesis
5. Report preparation or preparation of the narrative exposition
 Other Types of Research
• Based on Time
– Cross – Sectional Research
– Longitudinal Research

• Based on Environment
– Field Research
– Laboratory Research

• Clinical or Diagnostic Research

• Case study or in-depth approaches
 Exploratory Research
 Hypothesis development, rather than
hypothesis testing

 Formalized Research
 Substantial structure and with specific
hypothesis to be tested
• Historical Research
– Utilize historical sources to study events of the past

• Conclusion oriented
– Picking a problem, redesign enquiry, conceptualize

• Decision oriented
– For the need for a decision maker, researcher cannot
embark upon research his own inclination
– e.g.: Operations Research
• The Rationalistic Method
– Derive knowledge through reasoning
– Basketball players are tall. Haresh is a basketball
player. Therefore, Haresh is tall.
• The Empirical Method
– Describes data or a study that is based on
objective observation
– Relies on observation or experience, capable of
being verified by experiment
Unscientific Methods of Problem Solving
• Tenacity
– Cling to certain beliefs despite lack of evidence
– Superstitions; eg: Black cat brings bad luck

• Intuition
– Considered to be common sense / self evident;
may be found to be false

• Authority
– Reference to authority – used as a source of
knowledge
RESEARCH PROBLEMS
 Refers to some difficulty which a
researcher experiences in the context
either a theoretical or practical situation
and wants to obtain solution for the same

78
Research questions
 How can a principal improve faculty morale?
 How do parents feel about the school counselling
program?
 Does client-centered therapy produces more satisfaction
in clients than traditional therapy?
 Are the descriptions of people in social studies
discussions biased?
 Do teachers behave differently towards students of
different genders?
 What is the meaning of life?
 Does God exist?
 Are children happier when taught by a teacher of the
same gender?
 What is the absolute best way to teach history?
 Components of a Research Problem

(i) There must be an individual or a group which has some

difficulty or the problem
(ii) There must be some objectives to be attained at.
(iii) There must be alternative means for obtaining the
objectives one wishes to attain
(iv) There must remain some doubt in the mind of a
researcher with regard to the selection of alternatives
(v) There must be some environment to which the difficulty
pertains

80
TECHNIQUES IN DEFINING A PROBLEM

1. Statement of the problem in a general

way
2. Understanding the nature of the problem
3. Surveying the available literature
4. Developing the ideas through discussions
5. Rephrasing the research problem

81
Example
Sales has come down when compared to
previous year?
Ambiguities;
 What sort of product ?
 What time period?

“What factors were responsible for the low

sales of the product ‘X’ for the year 201-
2012 as against 2010-2011?”
82
 Example
Why is productivity in Japan so much higher than
in India?
Ambiguities;
 What sort of productivity?
 What industry?
 What period of time?
“ What factors were responsible for the higher
labour productivity of Japan’s manufacturing
industries during the decade 1971 t0 1980
relative to India’s manufacturing industries?”
83
 STEPS IN RESEARCH PROBLEM

Statement Describing the

Review of literature
of the problem nature of the problem

Formulating the
ideas through
discussions

Finalizing the
research problem

84
Hypothesis
 A Hypothesis is the statement or an
assumption about relationships between
variables.
or

 A Hypothesis is a tentative explanation for

certain behaviors, phenomenon or events
that have occurred or will occur.
 A logically conjectured relationship between two or
more variables expressed in the form of a testable
statement
Meaning
• It is the statement capable of being tested and thereby verified or rejected
• It is a proposition (suggestion) which can be put to test to determine
validity
CHARACTERISTICS :
• It should be clear and precise
• It should be capable of being tested
• It should be related to the body of the theory
• It should be related to the available techniques
• It should state relationship between variables
• It should be stated in simple terms
• It should be consistent with most known facts
86
Hypothesis Defined
A wild or wise guess
 An educated guess
 A tentative point of view
 A proposition not yet tested
 A preliminary explanation
 A preliminary Postulate
Definition by various authors
 “A hypothesis is a conjectural statement of the relation
between two or more variables”. (Kerlinger, 1956)

 “Hypotheses are single tentative guesses, good hunches –

assumed for use in devising theory or planning experiments
intended to be given a direct experimental test when
possible”. (Eric Rogers, 1966)

 “Hypothesis is a formal statement that presents the expected

relationship between an independent and dependent
variable.”(Creswell, 1994)
 Conceptual clarity:
Hypothesis should consist of clearly defined &
understandable concepts. It should be stated in very
terms, the meaning & implication of which cannot be
doubted. To facilitate the conceptual clarity,
hypothesis can be stated in declarative statement, in
present tense.
 Empirical referents:
Research must have an ultimate empirical
referent. No usable hypothesis can embody moral
judgments. A good hypothesis must have empirical
basis from the area of enquiry.
 Objectivity:
Hypothesis must be objective, which
facilitates objectivity in data collection & keeps
the research activity free from researcher value -
judgment.
 Specificity:
It should be specific, not general, & should
explain the expected relations between variables.
For example, regular yoga reduces stress.
 Consistency:
A hypothesis should be consistent with an
existing body of theories, research findings, &
other hypotheses. It should correspond with
existing knowledge.

 Simplicity:
A hypothesis should be formulated in simple
& understandable terms. It should require fewer
conditions & assumptions.
 Relevant:
The hypothesis should be relevant to the
problem being studied as well as the objectives of
the study. Hypothesis must have relevance with
theory under test in a research process.

 Testability:
Hypothesis should be testable & should not be
a moral judgment. It must be directly/indirectly
observable & measurable. The researcher can set
up a situation that permits one to assess if it is true
or false. It must be verifiable. For example, a
statement such as ‘bad partners produce bad
children’. This sort of hypothesis cannot be tested.
 Availability of techniques:
The researchers must make sure that
methods are available for testing their proposed
hypotheses.
 Purposiveness:
The researcher must formulate only
purposeful hypotheses, which has relevance with
research problem & objectives.
 Verifiability:
A good hypothesis can be actually verified in
practical terms.
 Profundity of effect:
A good hypothesis should have
profound effect upon a variety of research variables.
 Economical:
The expenditure of money & the time can be
controlled if the hypotheses underlying the research
undertaken is good.
Interesting Hypothesis
 Bankers assumed high-income earners are
more profitable than low-income earners.
 Source of Hypothesis
1.Theoretical or conceptual frameworks:
 The most important sources of hypotheses are
theoretical or conceptual frameworks developed for
the study.
 Through a deductive approach these hypotheses are
drawn from theoretical or conceptual frameworks for
testing them.
 For example, Roy’s adaptation Model is used in a
research study, where a hypothesis can be drawn
from a concept of the theoretical mode that ‘patient’s
adaptation to a chronic illness depends on
availability of social support for them.’
Previous research:
 Findings of the previous studies may be used for
framing the hypotheses for another study.
 For example, in a small sample descriptive study, a
researcher found that a number of patients admitted
with coronary artery disease had increased body
mass index.
 In another research study, a researcher may use this
finding to formulate a hypothesis as ‘Obese patients
have increased risk for development of coronary
artery disease’.
Real-life experiences:
 Real-life experiences also contribute in the formulation of
hypotheses for research studies.
 For example, Newton had a life-changing experience of
the falling of an apple & formulated a hypothesis that
earth attracts all the mass towards its centre, through
several researchers were conducted before generating a
law of central gravity.
Academic literature
 Academic literature is based on formal theories,
empirical evidences, experiences, observation,
& conceptualizations of academicians.
 These literatures may serve as good sources for
formulating hypotheses for research studies.
Terms Introduce in Prior Chapter
 Population  all possible values
 Sample  a portion of the population
 Statistical inference  generalizing from a
sample to a population with calculated degree
of certainty
 Two forms of statistical inference
 Hypothesis testing
 Estimation
 Parameter  a characteristic of population, e.g.,
population mean µ
 Statistic  calculated from data in the sample, e.g.,
sample mean ( x )
 Categorizing Hypotheses
Can be categorized in different ways

1. Based on their formulation

Null Hypotheses and Alternate Hypotheses

2. Based on direction
Directional and Non-directional Hypothesis

3. Based on their derivation

Inductive and Deductive Hypotheses
Null hypothesis :
The statistical hypothesis that states that there is no difference
between observed and expected is known as null hypothesis
Eg There is no relationship b/w income and satisfaction
Alternative hypothesis :
The set of alternatives to null hypothesis is referred to as
alternative hypothesis .

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2. Directional Hypothesis and Non-directional
Hypothesis
 Simply based on the wording of the hypotheses
we can tell the difference between directional
and non-directional

 If the hypothesis simply predicts that there will be a

difference between the two groups, then it is a non-
directional hypothesis. It is non-directional because it
predicts that there will be a difference but does not specify
how the groups will differ.

 If, however, the hypothesis uses so-called comparison

terms, such as “greater,”“less,”“better,” or “worse,” then it
is a directional hypothesis. It is directional because it
predicts that there will be a difference between the two
groups and it specifies how the two groups will differ
 3. Inductive and Deductive Hypotheses
 classified in terms of how they were
derived:
- Inductive hypothesis - a generalization
based on observation

Observation Pattern Hypothesis Theory

- Deductive hypothesis - derived from theory

Theory Hypothesis Observation Confirmation

Descriptive hypothesis
These are propositions that describes the characteristics such as size , form or
distribution of a variable
The variable may be an object , person , organization , situation or event
Eg. There is a relat b/w age & job
 Relational hypothesis
These are propositions that describe the relation between two variables
The relationship suggested may have a positive or negative correlation or a
casual relationship
Eg. The greater the salary , more would be the job satisfaction
Working hypothesis
Hypothesis are formed while planning the study of a problem
In such cases , they are referred to as “working
Complex hypothesis :
Hypothesis in some typical or complex or peculiar investigations

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HYPOTHESIS TESTING
Inferential Statistics

 Inferential statistics to make judgments of

the probability that an observed difference
between groups is a dependable one or
one that might have happened by chance.
There are two main methods
used in inferential statistics:
 Estimation &
 Hypothesis testing
Criteria for Hypothesis Construction

 It should be empirically testable, whether it

is right or wrong.
 It should be specific and precise.
 The statements in the hypothesis should
not be contradictory.
 It should specify variables between which
the relationship is to be established.
 It should describe one issue only.
Steps in Hypothesis Testing
Types of Hypothesis
 Null Hypothesis (H0)
 Alternative Hypothesis (Ha or H1)
Each of the following statements is an example of a null
hypothesis and alternative hypothesis.
Establish Critical or Rejection region
 Select the Suitable Test of
significance or Test Statistic
 Whether the test involves one sample, two
samples, or samples?
 Whether two or more samples used are
independent or related?
 Is the measurement scale nominal,
ordinal, interval, or ratio?
The choice of a probability distribution of a sample
statistics is guided but the sample size n and the
value of population standard deviation  as shown
in the table.
Formulate a Decision Rule to
Accept Null Hypothesis
 Accept H0 if the test statistic value falls
within the area of acceptance.
 Reject otherwise.
 INTERPRETING RESULTS
Interpreting the weight of evidence against
the Null Hypothesis for rejecting / not
rejecting Ho

If the p-value for testing Ho is less than –

 < 0.10, we have some evidence that Ho is false

 < 0.05, we have strong evidence that Ho is false

 < 0.01, we have very strong evidence that Ho is false

 < 0.001, we have extremely strong evidence that Ho is false

Madhuranath R © 2012
ERRORS IN HYPOTHESIS TESTING
TYPES OF ERRORS

Actual State of Affairs

Belief Decision H0 is True H0 is False

H0 is False Reject H0 Type I Error Correct

False Positive Rejection
 1-
Power
H0 is True Fail to Reject Correct Failure Type II Error
H0 to Reject False
1- Negative

1. Type I error refers to the situation when we reject the null
hypothesis when it is true (H0 is wrongly rejected).
e.g H0: there is no difference between the two drugs on
average.
Type I error will occur if we conclude that the two drugs
produce different effects when actually there isn’t a
difference. Prob (Type I error) = significance level = α

2. Type II error refers to the situation when we accept the null

hypothesis when it is false.
H0: there is no difference between the two drugs on
average.
Type II error will occur if we conclude that the two drugs
produce the same effect when actually there is a
difference. Prob (Type II error) = ß
Type I and Type II Errors – Example

Your null hypothesis is that the battery for a heart

pacemaker has an average life of 300 days, with the
alternative hypothesis that the average life is more than
300 days. You are the quality control manager for the
battery manufacturer.
(a)Would you rather make a Type I error or a Type II error?
(b)Based on your answer to part (a), should you use a high
or low significance level?
Two Tail Test

Two tailed test will reject the null hypothesis if the

sample mean is significantly higher or lower than the
hypothesized mean. Appropriate when H0 : µ = µ0
and HA: µ ≠ µ0
e.g The manufacturer of light bulbs wants to
produce light bulbs with a mean life of 1000 hours. If
the lifetime is shorter he will lose customers to the
competition and if it is longer then he will incur a
high cost of production. He does not want to deviate
significantly from 1000 hours in either direction.
Thus he selects the hypotheses as
H0 : µ = 1000 hours and HA: µ ≠ 1000 hours
and uses a two tail test.