Formative Constructs Implemented via Common Factors

What is it about?

Recently there has been a renewed interest in formative measurement and its role in properly specified models. Formative measurement models are difficult to identify, and hence to estimate and test. Existing solutions to the identification problem are shown to not adequately represent the formative constructs of interest. We propose a new two-step approach to operationalize a formatively measured construct that allows a closely-matched common factor equivalent to be included in any structural equation model. We provide an artificial example and an original empirical study of privacy to illustrate our approach. Detailed proofs are given in an appendix.

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Why is it important?

Formative indicators are increasingly used by the academic community, but some caveats exist, which should be taken into consideration.