Business Research Methods 9e

Zikmund
Babin
3
Carr Theory Building
Griffin

Chapter 3
Theory Building

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not be scanned, copied or duplicated, or posted to a
publicly accessible website, in whole or in part.
LEARNING
OUTCOMES

1. Define the meaning of theory

2. Understand the goals of theory
3. Understand the terms concepts,
propositions, variables, and hypotheses
4. Discuss how theories are developed
5. Understand the scientific method

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 Theory and Practice

• What if the lights didn’t

come on when you
flipped the switch?
• You would seek a
logical explanation.
• Past experience would
guide your thoughts.
• Attribution theory is
one framework that
helps explain the world.

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 What is a Theory?
• Theory
• A formal, logical explanation of some events
that includes predictions or how things relate
to one another.
• Goals of Theory
• Understanding
• Predicting

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 Research Concepts
• Concept (or construct)
• A generalized idea about a class of objects,
attributes, occurrences or process that has
been given a name.
◗ Examples:
 leadership
 morale
 gross domestic product
 assets
 customer satisfaction
 market share

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 Social Network Theory

• Researchers have
developed theories about
the links and structures of
social networks, complete
with constructs and
propositions about how
linkages are formed and the
social capital they yield.

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 Social Network Theory

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 Ladder of Abstraction
• Ladder of Abstraction
• Organization of concepts in sequence from the most concrete and
individual to the most general.
• Abstract Level
• The level of knowledge expressing a concept that exists only as an
idea or a quality apart from an object.
• Empirical Level
• The level of knowledge that is verifiable by experience or
observation.
• Latent Construct
• A concept that is not directly observable or measurable, but can
be estimated through proxy measures.

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 EXHIBIT 3.1 A Ladder of Abstraction for Concepts

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 Ladder of Abstraction
Balance Sheet (Assets – Liabilities = Owner Equity)

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 Ladder of Abstraction
Income Statement (Revenues – Expenses = Profits)

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 EXHIBIT 3.3 Concepts are Abstractions of Reality

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 Latent Constructs

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 Research Propositions and Hypotheses

• Propositions
• Statements explaining the logical linkage
among certain concepts by asserting a
universal connection between concepts.
◗ Example: Treating employees better will make
them more loyal employees.
• Hypothesis
• Formal statement of an unproven proposition
that is empirically testable.
◗ Example: Giving employees one Friday off each
month will result in lower employee turnover.

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 Empirical Testing
• Empirical Testing
• Examining a research hypothesis against reality
using data.
• Variables
• Anything that may assume different numerical
values.
• The empirical assessment of a concept.
• Operationalizing
• The process of identifying the actual measurement
scales to asses the variables of interest.

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 EXHIBIT 3.3 Hypotheses Are the Empirical
Counterparts of Propositions

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 EXHIBIT 3.5 A Basic Theory Explaining Voluntary Job
Turnover

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 Theory Building
• Deductive Reasoning
• The logical process of deriving a conclusion
about a specific instance based on a known
general premise or something known to be
true.
• Inductive Reasoning
• The logical process of establishing a general
proposition on the basis of observation of
particular facts.

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 Hawthorne Studies Experiments
1924-1932

• The experiments were based on the understanding and

prediction that the physical working conditions such as
temperature, pay, work-layout (furniture and fixtures) are
important and only factors for determining employee
productivity.
• Those experiments were performed to find out the effect of
different levels of illumination (lighting; a type of physical
working conditions) on productivity of labor.
• These experiments were classic example of Deductive
Research. WHY, because the experiments were based on
already known facts that physical working conditions
predict employee performance. Lighting was a new factor
of physical working condition.

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 Hawthorne Studies Experiments
1924-1932
• Surprisingly, the productivity increased even when the
level of illumination was decreased. It was concluded that
factors other than light were also important. BUT, what
were those factors? Unknown!
• To understand, 21,000 employees were interviewed over a
period of three years to find out reasons for increased
productivity. It was concluded that The social and
psychological factors are responsible for workers'
productivity and job satisfaction. Only good physical
working conditions are not enough to increase
productivity.
• The process of interviewing to investigate the unknown
factors is a classic example of Inductive Research.

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 Theory Building

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 Theory Building
• The market‐based view (MBV), emphasizes the role
of market conditions in developing strategy for the firm.
This contrasts with the resource‐based view (RBV) which
focuses on the firm's resources and capabilities.

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 The Scientific Method
• Scientific
Suggested Method
steps:
1.• Assess
A set ofrelevant
prescribed
existing
procedures
knowledge
for establishing
of phenomenon
and connecting
2. theoreticalconcepts
Formulate statementsandabout events, for analyzing empirical
propositions
3. evidence,
State and for predicting events yet unknown.
hypotheses
4.• Techniques
Design or procedures
research to test theused to analyze empirical evidence in
hypotheses
an attempt to confirm or disprove prior conceptions.
5. Acquire empirical data
6. Analyze and evaluate data
7. Propose an explanation of the phenomenon and state new
problems raised by the research

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