I have an important question to continue with my research. What is the most appropriate way to introduce a categorical variable into SmartPLS? Here is an example. I have collected the data of the industry to which my companies belong in: primary, secondary and service sector. I hesitate between:
1. A construct with a single-indicator, which would be coded as 1 (primary sector), 2 (secondary sector), and 3 (service). How would it be interpreted?
2. A construct with two indicators: the first one would take the value of 1 if the company belongs to the primary sector, and 0 in other cases; and another indicator that would take the value of 1 if the company belongs to the secondary sector, and 0 in other cases. Thus, the base would be the service sector. In this case, the construct would be formative, right? How would it be interpreted?
3. Independent constructs, i.e. single-indicator constructs. How would it be interpreted?
This is an example of a control variable. I have the same problem with an indicator of an independent variable.
Thank you for your attention to this matter.