School of Management Research Seminar

PLS-SEM USING
SmartPLS 3
Ebenezer Larnyo, PhD
Postdoctoral Fellow, Institute of Information Systems Engineering, Jiangsu
University.
Email: dr.ebenlarnyo@ujs.edu.cn
Mobile #: +86-188-5140-8072
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 Seminar Outline
• What is PLS-SEM
• When to use PLS-SEM
• Minimum Sample Requirements
• PLS-SEM Path Modelling and Hypothesis Development
• Model Creation using SmartPLS
• Collecting and Preparing Data (Data Format)
• Evaluating and Interpretation of Measurement Model
• Evaluating and Interpretation of Structural Model

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 What is PLS-SEM

• A method of structural equation modeling which allows researchers to

model, simultaneously estimate and test complex theories (i.e. complex
cause-effect relationship models) with latent variables using empirical data.
• Its objective is to maximize the explained variance of the endogenous latent
constructs (dependent variables).

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 When to use PLS-SEM
• Testing a theoretical framework from a prediction perspective.
• Structural model is complex and includes many constructs, indicators and/or model
relationships.
• Goal is to better understand increasing complexity by exploring theoretical extensions
of established theories (exploratory research for theory development).
• Path model includes one or more formatively measured constructs.
• Research is based on secondary/archival data, which may lack a comprehensive
substantiation on the grounds of measurement theory.
• Small population restricts the sample size (e.g. business-to-business research)
• P:S: PLS-SEM also works very well with large sample sizes.
• Distribution issues are a concern, such as lack of normality.
• Research requires latent variable scores for follow-up analyses. 4
 Software for Analyzing PLS-SEM

• SmartPLS https://www.smartpls.com/
• AMOS https://www.ibm.com/products/structural-equation-modeling-sem
• EQS https://mvsoft.com/
• LISREL https://lisrel.software.informer.com/download/
• Mplus https://www.mplus.software/
• R https://www.r-project.org/
• JASP https://jasp-stats.org/
• Intellectus Statistics https://www.intellectusstatistics.com/ 5
Minimum Sample Requirements

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Graphical Notation for Depicting PLS-SEM Models

Latent variable

Observed variable

Unidirectional path

Disturbance or error in latent variable

Measurement error in observed variable

Correlation between variables

 SmartPLS
• Student version is available free of charge at https://www.smartpls.com/
• Student version offers full functionalities but is restricted to 100
observations per dataset.
• For datasets above 100 observations, you may download a 30-day trial
professional version at
https://purchase.smartpls.com/#/people/subscribe/smartpls3_trial or
https://www.smartpls.com/

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 Download the Data
• Download and or prepare the data you want to use as the basis for running
the model. Save data in comma delimited (*.csv)
• Sample data for this seminar can be downloaded at:
https://www.smartpls.com/documentation/sample-projects/utaut
• The data is based on the Unified Theory of Acceptance and Use of
Technology (UTAUT) used to assess technology adoption.

a. Click on the link to download the sample

project to your target location.
b. Extract the file using WinRAR or other
extracting tools.
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 Run the SmartPLS Software

• Run by double clicking the SmartPLS icon on you desktop or at the location
you installed it.
• Additionally, you can check the taskbar

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SmartPLS Interface

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 Creating New Project
• To create a new project, click on File Create New Project

Type the name of the project and click ok

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 Creating New Project: Importing Data
• After creating the new project, double-click to import data

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 Creating a Model

• Double-click on SIMPLE MODEL in the PROJECT EXPLORER window

• A graphical modelling window will appear on the right of the screen where
you can create the path model.
model

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 Hypothesis

• H1: PE has positive impact on BI to use technology.

• H2: EE has positive impact on BI to use technology.
• H3: FC has positive impact on BI to use technology.
• H4: SN has positive impact on BI to use technology.
• H5: FC has positive impact on actual USE of technology.
• H6: BI has positive impact on actual USE of technology.
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The UTAUT Model (Venkatesh et al. 2003)
Used to assess technology adoption and acceptance.
Latent variables include:
Performance expectancy, effort expectancy, social
influence or social networks, facilitating conditions,
behavioral intention and actual use behavior

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 Model Estimation and PLS-SEM Algorithm

• Estimating the model produces empirical measures, that can be used to

evaluate the relationships between:
• The indicators and the latent constructs.
• Between constructs.
• Essentially to determine how well the theory fits the data

• Results are reviewed and assessed systematically with the intention of

maximizing the explained variance (R squared value) of the endogenous
latent variables.
• Hence evaluating the model i.e. measurement model and structural model focuses on
the model’s predictive relevance.
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 Model Estimation and PLS-SEM Algorithm cont..

• What to look out for when assessing Measurement Model

• Reliability
• Convergent Validity
• Discriminant Validity

• What to look out for when assessing Structural Model

• R2 (explained variance)
• f2 (effect size)
• Q2 (predictive relevance)

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 Model Evaluation
Two Step Process:
1.Measurement Models
2.Structural Models
Reflective Measurement Models Formative Measurement Models
Internal Consistency (Cronbach’s Alpha, composite Convergent Validity
Reliability)

Convergent Validity (Indicator reliability, average variance Collinearity between indicators

extracted; AVE)

Discriminant Validity (Fornell & Larcker criterion, cross Significance and relevance of outer weights
loading, HTMT)

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 Evaluating the Measurement Model: PLS
Algorithm Report & Bootstrapping Reports
• Click calculate to run the algorithm report
• All partial regression models are estimated by the PLS-SEM algorithm’s
iterative procedures.
• Set value of iteration to at least 300

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 Internal Consistency Reliability
Cronbach’s Alpha (α) Composite Reliability (ρc)

Measures the reliability of a set of indicators Also known as Joreskog’s rho

Increases with number of indicators Measures the reliability of a set of indicators

A value of 0.7 is regarded acceptable. Threshold and interpretation the same as that
0.8 and 0.9 are appreciable (Nunally, 1978) for α

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 Result-Internal Consistency
Constructs Internal Consistency Reliability
Cronbach Criteria Remark Composite Criteria Remark
  Alpha Reliability
(CR)
PERFORMANCE
0-1 Reliable 0.7 to 0.9 Reliable
EXPECTANCY
EFFORT
0-1 Reliable 0.7 to 0.9 Reliable
EXPECTANCY
SOCIAL
0-1 Reliable 0.7 to 0.9 Reliable
NETWORK
FACILITATING
0-1 Reliable 0.7 to 0.9 Reliable
CONDITIONS
BEHAVIORAL
0-1 Reliable 0.7 to 0.9 Reliable
INTENTION
 
ACTUAL USE
0-1 Reliable 0.7 to 0.9 Reliable 24
BEHAVIOR
 
 Convergent Validity
• Convergent Validity is the extent to which a measure correlates positively
with alternative measure of the same construct.
• To evaluate convergent validity consider the outer loadings of the indicators
and the AVE.
Factor Loadings Composite Reliability (ρc)

Loadings >0.708,
>0.708 the latent variables can explain Comparable to the proportion of variance
at least 50% of its indicator’s variance explained in factor analysis

Values ranges from 0 to 1

Loadings of 0.4, 0.5, 0.6 and 0.7 can be accepted
if it leads to Average Variance Extracted (AVE)
AVE should exceed 0.5 to suggest adequate
that is larger than 0.5
convergent validity (Bagozzi & Yi, 1988, Fornell
& Larcker, 1981)
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 Result-Convergent Validity
Constructs Notation Convergent Validity
Outer
    Criteria Remark (AVE) Criteria Remark
Loading
BI1 Fulfilled
BEHAVIORAL Fulfilled
BI2
INTENTION BI3
EE1
EFFORT EE2
EXPECTANCY EE3
EE4
FC1
FACILITATING
FC2 >0.7 or >0.8
CONDITIONS FC3
PE1
>0.5
PERFORMANCE PE2
EXPECTANCY PE3
PE4
SN1
SOCIAL
SN2
NETWORK SN3
USE1
 ACTUAL USE
USE2
BEHAVIOR  USE3
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 Discriminant Validity
• Discriminant Validity is the extent to which a construct is truly distinct from
other constructs (i.e. uniqueness of a construct).
• To evaluate discriminant validity consider: Cross loadings, Fornell & Larcker
Criterion and Heterotrait-Monotrait Ratio (HTMT)
Fornell & Larcker Cross Loadings
The AVE of a latent variable should be higher than
The loadings of an indicator on its assigned
the squared correlations between the latent
latent variable should be higher than its loadings
variables and all other variables ( Chin, 2010; Chin
on all other latent variables.
1998b; Fornell & Larcker, 1981)
Heterotrait-Monotrait Ratio (HTMT)

An estimate of correlation between the constructs based on the average of heterotrait-

heteromethod correlation as proposed by Henseler, Ringle & Sarstedt, 2015).
•Ratio of HTMT is expected to be lower than 0.90 at 95% confidence interval.
interval
•To examine HTMT,
HTMT we test whether the HTMT values are significantly different from 1.
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•The value of HTMT higher then 0.9 indicate there is lack of discriminant validity. 27
 Result-Fornell & Larcker Criterion
• Compare the square root of AVE values with the latent variable correlations.
• The square root of each construct’s AVE should be greater than its highest
correlation with any other construct.

Constructs
  BI EE FC PE SN USE AVE SQRT AVE

BI

EE

FC

PE

SN

USE
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 Result-C ross Loadings
• All indicator’s outer loadings on the associated construct must be greater than all
of its loadings on other constructs to fulfil the criteria for assessing cross loading.
• This report can be found under discriminant validity
Notation BI EE FC PE SN USE
BI1
BI2
BI3
EE1
EE2
EE3
EE4
FC1
FC2
FC3
PE1
PE2
PE3
PE4
SN1
SN2
SN3
USE1 29

USE2
 Result-HTMT
• To examine HTMT, we test whether the HTMT values are significantly different
from 1 using the bootstrapping report. Got to path coefficient and find Confidence
Intervals Bias Corrected
• The value of HTMT higher then 0.9 indicate there is lack of discriminant validity
  BI EE FC PE SN USE 2.5% 97.5% Remark (HTMT CI doesn’t include 1)

BI            

EE
FC
PE
SN

USE

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Result Summary for Reflective Measurement Model
Constructs Notation Convergent Validity Internal Consistency Reliability
HTMT ! Composite
Outer Cronbach’s Alpha
    (AVE) =1? Reliability
Loading
(Yes/No) 0.6-0.9 0.6-0.9
BI1
BEHAVIORAL
BI2
INTENTION BI3
EE1
EFFORT EE2
EXPECTANCY EE3
EE4
FC1
FACILITATING
FC2
CONDITIONS FC3
PE1
PERFORMANCE PE2
EXPECTANCY PE3
PE4
SN1
SOCIAL NETWORK SN2
SN3
USE1
 ACTUAL USE 31
USE2
BEHAVIOR  USE3
 Evaluating the Structural Model:
Bootstrapping & Blindfolding Reports
• Enables you to determine the model’s capability to predict one or more
target construct.
Structural Model Assessment Procedure
1. Collinearity Assessment
2. Path Coefficients
3. Coefficients of Determination (R2 Values)
4. Effect Size (f2 Values)
5. Blindfolding and Predictive Relevance (Q2 Values)
6. Effect Size (q2 Values)
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 Collinearity Assessment
• Collinearity arises when two indicators are highly correlated.
correlated
• Collinearity between latent variables are assessed using Variance Inflated
Factor (VIF).
• Can be found at PLS algorithm Collinearity Statistics
Inner VIF Values
Threshold
1. VIF ≥ 5 indicate a potential collinearity problem (Hair, Ringle &
Sarsted, 2011)
2. VIF ≥ 3 indicate a potential collinearity problem (Diamantopoulos &
Siguaw, 2006)

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 Result-Collinearity Assessment

  BI EE FC PE SN USE

BI            

EE

FC

PE

SN

USE

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 Path Coefficient
• Path Coefficient is the coefficient linking constructs in the structural model.
model
• Represent the hypothesized relationship or the strength of the relationship.
• Path Coefficient close to +1 indicate a strong positive relationship and vice versa
for negative values.

• The closer the estimated coefficients are to 0, the weaker the relationship.

• Very low values close to 0 are generally not statistically significant.

• Can be found at PLS algorithm Path Coefficient
• Model diagram also gives a pictorial view of the path coefficient.
coefficient

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 Result-Path Coefficient

  BI EE FC PE SN USE

BI            

EE
FC
PE
SN

USE

• The Higher the bar, the stronger the relationship.

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 Path Coefficient cont…
• Whether a coefficient is significant or not depends on its standard error that is
obtained by bootstrapping.
bootstrapping
• Bootstrapping helps to compute the empirical t values and p values for all
structural path coefficient.
coefficient
• t values
• When an empirical t value is larger than the critical value, we conclude that the
coefficient is statistically significant at a certain error probability.
• Commonly used critical values for two-tailed test are 1.65 (significant level
at 10%) and 1.96 (significant level =5%)
• Calculate Bootstrapping
• Bootstrapping Report path coefficient T Statistics

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 Result-t Values

 Constructs T- Statistics Critical Value Statistically Significant? (Yes/No)

BI -> USE    1.65 or 1.96  

EE -> BI 1.65 or 1.96

FC -> BI 1.65 or 1.96
PE -> BI 1.65 or 1.96
SN -> BI 1.65 or 1.96

BI -> USE 1.65 or 1.96

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 Path Coefficient cont…

• p values
• p value is used to assess significance level.
level
• When assuming significance level of 5% , p value must be smaller than 0.05 to
conclude that the relationship under consideration is significant at a 5% level.

• When assuming significance level of 1% , p value must be smaller than 0.01 to

conclude that the relationship under consideration is significant at a 1% level.
• Bootstrapping Report Path Coefficient p Value

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 Result-pValues

Significance
 Constructs P Value Statistically Significant? (Yes/No)
Level
BI -> USE    0.01 or 0.05  

EE -> BI  0.01 or 0.05

FC -> BI  0.01 or 0.05

PE -> BI  0.01 or 0.05

SN -> BI  0.01 or 0.05

BI -> USE  0.01 or 0.05

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 Result- Path Coefficient
• The individual path coefficient can be interpreted as the standardized beta coefficient
in an ordinary least squares regression (OLS).
(OLS)
• A unit change of exogenous construct changes the endogenous construct by the
size of the path coefficient when everything else remains constant (Hair et al., 2010).

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 Coefficients of Determination (R2 Values)
• The R indicates the variance explained of the endogenous variable by the
2

exogenous variable.
variable
• R2 values ranges from 0 to 1,1 with higher levels indicating higher levels of
predictive accuracy.
accuracy
• Values of 0.75, 0.50 and 0.25 indicate substantial, moderate and weak
predictive accuracy (Hait et al., 2011; Henseler et al., 2009).
• Values of 0.67, 0.33 and 0.19 indicate substantial,
substantial moderate and weak
predictive accuracy (Chin, 1998).
• Values of  ≥  0.90 are indicative of overfitting
• PLS Algorithm Quality Criteria R2 and R2 adjusted

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 Result-R2 Values
 Construct R Square R Square Adjusted Remark

BI

USE

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 Effect Size (f2 Values)

• Help to determine the effect of each exogenous construct on the

endogenous construct.
construct
• Values of 0.02, 0.15 and 0.35 indicate small, medium and large effect of the
exogenous latent variable (Cohen, 1998).
• Effect size values < 0.02 indicate no effect.
• PLS Algorithm Quality Criteria f2

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 Result- f2 Values
  BI EE FC PE SN USE

BI            

EE

FC

PE

SN

USE

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 Blindfolding and Predictive Relevance (Q2 Values)
• To evaluate the magnitude of R 2 examine the Geisser’s Q2 value (Geisser,
1974; Stone, 1974).
• Q is an indicator of the model’s predictive power.
2

• Obtained using Blindfolding procedure with omission distance D values

ranging from 5 to 10.
•Q 2 value >0 suggest that the model has predictive relevance for a certain
endogenous construct.
construct However, values ≤ 0 shows a lack of predictive
relevance.
relevance
• Calculate Blindfolding Construct Crossvalidated
Redundancy

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 Result- Q2 Values
  SSO SSE Q² (=1-SSE/SSO)

BI      

EE
FC
PE
SN

USE

• Remember, values greater than 0 indicate that the model has predictive relevance.

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 Effect Size (q2 Values)

• A relative measure of predictive relevance used to assess an exogenous

construct’s contribution to an endogenous latent variable’s Q2.
• Values of 0.02, 0.15 and 0.35 indicate small, medium and large effect respectively
of the exogenous construct’s predictive relevance for a certain endogenous
construct.
construct

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 Result- q2 Values

  SSO SSE Q² (=1-SSE/SSO)

BI      

EE
q2= Q2 included- Q2 excluded
FC 1-Q2 included
PE

SN

USE

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GOOD LUCK AND SEE YOU NEXT TIME
祝你好运，下次再见

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