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Should I use reflective or formative construct?

Posted: Sun Apr 17, 2022 1:29 pm
by Marsha Sabrina
Dear All,

I have an observed firm performance as dependent variable (i.e. performance measured by ROA, ROE, Tobin's Q, and market to book ratio). Then the independent variable are three type of ownership structure (foreign, managerial, and state ownership). The mediation variable is independent commisioner.
So i am confused how should i model this observed?. Should it be a formative construct or a reflective construct?. Thanks

Re: Should I use reflective or formative construct?

Posted: Wed Jun 29, 2022 8:45 am
by UmangVarshney
Hi,
You should go for the formative construct. To understand the reasoning you can read the following paper. It has very nicely explained the difference between the reflective and formative scales.
Petter, S., Straub, D., & Rai, A. (2007). Specifying formative constructs in information systems research. MIS quarterly, 623-656.

All the best!