SEM

&
PLS-SEM

DR SHAHAB AZIZ

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Key outcomes

Why SEM.
Interface
Type of data
Import Data
Build the
model
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History

First Generation
Statistical Techniques
1980s

Second generation
Statistical Techniques
1990s onward

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Multivariate Method

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 WHY SEM?
• Its called 2nd generation analysis technique
• It work with latent variables
• When a construct is measured through items i.e. loyalty, satisfaction , attitude etc.
• We need scores of variables for analysis before running regression
• Cant work with items.
• In SEM no need to calculate scores
• We can perform analysis
• 2nd generation is able to work with latent variables
• SEM can handle different level of complexity
• For example, 3 layers , 1st generation cant do
• Multiple DVs.
• We don’t need to split the layers

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 SEM

Factor Analysis+ Regression

Factor Analysis where we check the reliability and validity of the

variables and followed by regression analysis SEM combines both of
them in one package

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 Structural Theory
Measurement Theory Support for structural
support how the relationship/
construct is measured hypothesis
development

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 Type of SEM

SEM

Covariance based Variance Based

SEM SEM
CB-SEM PLS-SEM
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CB –SEM focus on correlation/ covariance

Objective is to minimize the difference between the data and the model

We compare covariance from the data and model.

Goodness of fit is important. Shows these difference between covariance between the model and the data.

PLS-SEM is regression based.

Variance based approach.

Try to maximize the explained variance of endogenous construct from exogenous constructs.

Don’t talk about covariance.

Goodness of fit is not important criteria.

We look at explained variance.

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 Confirmatory vs explanatory

Explanatory
Confirmatory Searching for latent pattern
in the data (Theory is less
Testing the hypothesis of
developed)
existing theories

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 When using PLS-SEM, researchers benefit
from the method’s high degree of statistical
power compared to CB-SEM (Reinartz et al.,
Statistical 2009; Hair et al., 2017c).

Power Greater statistical power means that PLS-

SEM is more likely to identify relationships
as significant when they are indeed present
in the population (Sarstedt and Mooi,
2019).

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Software application

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 For many years, covariance-based structural
equation modeling (CB-SEM) was the dominant
method for analyzing complex interrelationships
between observed and latent variables. In fact, until
around 2010, there were far more articles published
in social sciences journals that used CBSEM instead
of partial least squares SEM (PLS-SEM).

PLS-SEM
By 2015, however, the number of published articles
using PLS-SEM increased significantly relative to CB-
SEM (Hair et al.,2012b).

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In fact, PLS-SEM is now widely applied in many social science disciplines, including

Organizational management (Sosik et al., 2009),

International management (Richter et al., 2015),

Human resource management (Ringle et al., 2019),

Management information systems (Hair et al., 2016a; Ringle et al., 2012),

Operations management (Peng and Lai, 2012),

Marketing (Hair et al., 2012b),

Management accounting (Nitzl, 2016),

Strategic management (Hair et al., 2012a),

Hospitality (Ali et al., 2018b), and

Supply chain management (Kaufmann and Gaeckler, 2015)

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PLS – SEM analysis is
2 Step process

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 Shows
Relationship
between Measurement
constructs and Model
indicator
variables

PLS-SEM
Analysis
Shows
Relationship Structural
between Model
constructs

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SMARTPLS

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CREATING PROJECT

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File Created

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Double click

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 Data
imported

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To draw Model

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Click, Click,
Click

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 Right click
and rename

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 Select relevant
items, drag and
drop

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Indicators can
be moved

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The End

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