Including control variables

[cgrimpe]

Hi,

there has been quite a lot of discussion on moderating effects in PLS. However, I'm still unsure how to include a bunch of control or context variables. In OLS, you typically have your hypothesized relation and then there are a number of controls that could have an impact on this relationship. These might include firm relatedness, age, size, experience and so forth that are normally simply added to the regression equation. Some of them might also be dummy variables.

My understanding up to now is that you would have to create an LV for every control measured by just one indicator. This, however, renders new problems: First, constructs shouldn't be measured by just one item and second, this could blow up your required sample size when applying Chin's rule.

What is your opinion?

[panhans]

... why not first consider a subgroup analysis to identify which control variables are really relevant, and then to run PLS a second time adding only those controls that showed a significant effect in the subgroup analysis?

Best,
Dirk

[jjsailors]

Hi,

My understanding up to now is that you would have to create an LV for every control measured by just one indicator. This, however, renders new problems: First, constructs shouldn't be measured by just one item and second, this could blow up your required sample size when applying Chin's rule.

First, the need to measure constructs by multiple indicators to correct for measurement error is independent of the anaylsis method, so if you would use a single indicator for these control variables in an OLS regression, it is no worse (and no better) to do so in PLS. Also, there is no modeling of measurement error in PLS anyway (regardless of whether the indicators are specified as formative or reflective).

Second, regading sample size. There was a nice article referenced the other day on the forum (~ PLS is not a Silver Bullet) that you should read. If your sample size is so small that you would have concerns by adding a few control/covariate variables, you may have issues even without adding them that you should explore.