Need help with Variables on SMART-PLS 4

[douggant]

Hello,
I have a model with 4 variables (A, B, C and D) where the first 3 connect with the D, pretty straightforward.

However, I have a categorical variable which is Generations and it includes 4 generations. I want to test on Smart-PLS 4 this variable, considering it's part of the hypothesis I made, for example:

D differs across Generations
A differs across generations

The thing is, I've seen examples where people put the categorical variable in the model with 3 of the 4 dummies attached (one serving as a reference) and some where they put all 4. I'm a bit lost right now, I don't know what approach to have.
Can anyone help me out?

[jmbecker]

You cannot analyze a categorical variable directly. As PLS is regression-based you will need to dummy code or something similar. If you dummy code you will always have one (dummy) variable less than categories and the omitted category becomes the reference category. If you would include a dummy for each category you would run into perfect collinearity and the model is not estimable.