EconPapers    
Economics at your fingertips  
 

An empirical comparison of the efficacy of covariance-based and variance-based SEM

Werner Reinartz, Michael Haenlein and Jörg Henseler

International Journal of Research in Marketing, 2009, vol. 26, issue 4, 332-344

Abstract: Variance-based SEM, also known under the term partial least squares (PLS) analysis, is an approach that has gained increasing interest among marketing researchers in recent years. During the last 25years, more than 30 articles have been published in leading marketing journals that have applied this approach instead of the more traditional alternative of covariance-based SEM (CBSEM). However, although an analysis of these previous publications shows that there seems to be at least an implicit agreement about the factors that should drive the choice between PLS analysis and CBSEM, no research has until now empirically compared the performance of these approaches given a set of different conditions. Our study addresses this open question by conducting a large-scale Monte-Carlo simulation. We show that justifying the choice of PLS due to a lack of assumptions regarding indicator distribution and measurement scale is often inappropriate, as CBSEM proves extremely robust with respect to violations of its underlying distributional assumptions. Additionally, CBSEM clearly outperforms PLS in terms of parameter consistency and is preferable in terms of parameter accuracy as long as the sample size exceeds a certain threshold (250 observations). Nevertheless, PLS analysis should be preferred when the emphasis is on prediction and theory development, as the statistical power of PLS is always larger than or equal to that of CBSEM; already, 100 observations can be sufficient to achieve acceptable levels of statistical power given a certain quality of the measurement model.

Keywords: Structural equation modeling; Maximum-likelihood; LISREL; PLS; Monte-Carlo simulation (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (144) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167811609000639
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ijrema:v:26:y:2009:i:4:p:332-344

Access Statistics for this article

International Journal of Research in Marketing is currently edited by Roland Rust

More articles in International Journal of Research in Marketing from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-10-17
Handle: RePEc:eee:ijrema:v:26:y:2009:i:4:p:332-344