Discriminant validity assessment has become a generally accepted prerequisite for analyzing relationships between latent variables. For variance-based structural equation modeling, such as partial least squares, the Fornell-Larcker criterion and the examination of cross-loadings are the dominant approaches for evaluating discriminant validity. By means of a simulation study, we show that these approaches do not reliably detect the lack of discriminant validity in common research situations. We therefore propose an alternative approach, based on the multitrait-multimethod matrix, to assess discriminant validity: the heterotrait-monotrait ratio of correlations. We demonstrate its superior performance by means of a Monte Carlo simulation study, in which we compare the new approach to the Fornell-Larcker criterion and the assessment of (partial) cross-loadings. Finally, we provide guidelines on how to handle discriminant validity issues in variance-based structural equation modeling.

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A new criterion for assessing discriminant validity in variance-based structural equation modeling

Structural equation modeling (SEM) has become a quasi-standard in marketing and management research when it comes to analyzing the cause-effect relations between latent constructs. For most researchers, SEM is equivalent to carrying out covariance-based SEM (CB-SEM). While marketing researchers have a basic understanding of CB-SEM, most of them are only barely familiar with the other useful approach to SEM-partial least squares SEM (PLS-SEM). The current paper reviews PLS-SEM and its algorithm, and provides an overview of when it can be most appropriately applied, indicating its potential and limitations for future research. The authors conclude that PLS-SEM path modeling, if appropriately applied, is indeed a "silver bullet" for estimating causal models in many theoretical models and empirical data situations.

PLS-SEM: Indeed a Silver Bullet

This paper answers the question, "Why do organizations process information?" Uncertainty and equivocality are defined as two forces that influence information processing in organizations. Organization structure and internal systems determine both the amount and richness of information provided to managers. Models are proposed that show how organizations can be designed to meet the information needs of technology, interdepartmental relations, and the environment. One implication for managers is that a major problem is lack of clarity, not lack of data. The models indicate how organizations can be designed to provide information mechanisms to both reduce uncertainty and resolve equivocality.

https://www.jstor.org/stable/pdfplus/2631846.pdf

Organizational information requirements, media richness and structural design

Purpose: This paper discusses partial least squares path modeling (PLS), a powerful structural equation modeling technique for research on international marketing. While a significant body of research provides guidance for the use of covariance-based structural equation modeling (CBSEM) in international marketing, there are no subject-specific guidelines for the use of PLS so far.Methodology/approach: A literature review of the use of PLS in international marketing reveals the increasing application of this methodology.Findings: This paper reveals the strengths and weaknesses of PLS in the context of research on international marketing, and provides guidance for multi-group analysis.Originality/value of paper: The paper assists researchers in making well-grounded decisions regarding the application of PLS in certain research situations and provides specific implications for an appropriate application of the methodology.

The Use of Partial Least Squares Path Modeling in International Marketing

‘The Production of Space’, in: Frans Jacobi, Imagine, Space Poetry, Copenhagen, 1996, unpaginated.

The Production of Space

Computer networks are an increasingly important technology for improving the efficiency of information processing and providing shared access to information resources. Because computer networks are increasingly being used to support the flow of information between and within organizations, their use both influences and has consequences for interorganizational relationships. An important and widespread application of interorganizational computer networks is Electronic Data Interchange (EDI), which refers to the computer-based exchange of standardized business-related information between buyer and supplier firms. The following theoretical framework addresses the role that power and trust play in EDI adoption and use. Firms with greater power can influence their trading partners to adopt EDI. But power can be exercised in different ways. Because computer networks provide a way for certain information to be more accessible to outside parties, their use makes organizational boundaries more permeable. When firm...

Power and Trust: Critical Factors in the Adoption and Use of Electronic Data Interchange

This study uses Galbraith's information processing theory to examine the fit between information processing needs and information processing capability in an interorganizational supply chain context and to examine its effect on performance. Information processing needs are assessed based on various characteristics of the product and procurement environment and information processing capabilities are assessed by the level of information technology support for various activities in the procurement life cycle. A taxonomy of information processing needs and information processing capabilities is developed. The effect of the fit between information processing needs and capabilities on procurement performance is examined. The study collected data on 142 products through personal interviews and surveys, used cluster analytic techniques to develop taxonomies, and analysis of variance (ANOVA) to test the fit between needs and capability, modeled as an interaction effect. The results reveal two clusters for information processing needs and three clusters for information processing capability. ANOVA results show that the interactive effect of information needs and capability has a significant effect on performance, supporting our fit theory.

https://www.jstor.org/stable/pdfplus/40398764.pdf

Information Processing View of Organizations: An Exploratory Examination of Fit in the Context of Interorganizational Relationships

The conventional wisdom is that companies should never outsource core functions. This study of thirty-four large companies, which outsourced for at least two years, demonstrates that outsourcing can be successful even when information systems are viewed as core functions. However, outsourcing negotiations must reflect the role of the company performing the outsourced functions and the nature of the outsourced work. A critical key to success in outsourcing arrangements lies in having tight contracts, even when the outsourcing vendor is viewed as a strategic partner or the IS function is considered to be core. This article offers prescriptions for writing contracts and creating balanced arrangements to enhance outsourcing success.

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Achieving Success in Information Systems Outsourcing

The diffusion of network technologies and the developing interest in emerging organizational forms suggest that researchers ought to pay more attention to the development of "electronic partnerships." This preliminary investigation tests a theoretical framework relating two pivotal themes, power and trust, to the use of electronic data interchange (EDI). Separate models were tested incorporating two dimensions of EDI use: volume of transactions and diversity of EDI transaction sets. The relationships among supplier dependence, customer power, and EDI use were different for volume and diversity, suggesting unique conditions that predict each dimension. Interestingly, power was negatively related to the volume of EDI transactions indicating that, while electronic networks may facilitate easier exchanges, they may not necessarily lead to increases in the frequency of exchanges. The relationships among commitment, trust, and EDI use were also different for volume and diversity. Trust was related to diversity but not volume. Moreover, trust was related to increases in diversity of EDI use, in contrast to power, which was negatively related to diversity. This latter finding may offer an important prescription for managers who seek to expand the effective use of EDl and for IT researchers who need to focus on the role of trust in supporting information exchange between electronic partners.

Emerging electronic partnerships: antecedents and dimensions of EDI use from the supplier's perspective

This study uses a metatriangulation approach to explore the relationships between power and information technology impacts, development or deployment, and management or use in a sample of 82 articles from 12 management and MIS journals published between 1980 and 1999. We explore the multiple paradigms underlying this research by applying two sets of lenses to examine the major findings from our sample. The technological imperative, organizational imperative, and emergent perspectives (Markus and Robey 1988) are used as one set of lenses to better understand researchers' views regarding the causal structure between IT and organizational power. A second set of lenses, which includes the rational, pluralist, interpretive, and radical perspectives (Bradshaw-Camball and Murray 1991), is used to focus on researchers' views of the role of power and different IT outcomes. We apply each lens separately to describe patterns emerging from the previous power and IT studies. In addition, we discuss the similarities and differences that occur when the two sets of lenses are simultaneously applied. We draw from this discussion to develop metaconjectures, (i.e., propositions that can be interpreted from multiple perspectives), and to suggest guidelines for studying power in future research.

Carol Saunders

Papers

Power and Trust: Critical Factors in the Adoption and Use of Electronic Data Interchange

Information Processing View of Organizations: An Exploratory Examination of Fit in the Context of Interorganizational Relationships

Achieving Success in Information Systems Outsourcing

Emerging electronic partnerships: antecedents and dimensions of EDI use from the supplier's perspective

Review: power and information technology research: a metatriangulation review