The Business Research Process: An Overview Research Methods in Management The Business Research Process: An Overview Causality in research

Causal Research Research conducted to identify cause and effect relationships (inferences). Cause Effect

Causal Research Cause 1 Problem Cause 2 Cause 3

(Unidirectional relationship) A B (1) A causes B (Unidirectional relationship)   A B (2) B causes A  (Unidirectional relationship) A B (3) A and B cause each other (Bidirectional relationship)   A B (4) A and B just correlate (The direction of causality cannot be implied) A B

Reverse causation Reverse causality means that the direction of causality between two factors may be opposite from what we expect OR

Having money allows people to gain access to better healthcare service Reverse causation Example: Considered the relationship between “Income” and “Health” ..which one is the cause? ..which one is the effect? Having money allows people to gain access to better healthcare service Income Health Having good health allows people to be more productive to earn more money

Companies need loan to grow their business Reverse causation Example: Considered the relationship between “the amount of bank loan” and “business growth” ..which one is the cause? ..which one is the effect? Companies need loan to grow their business Loan amount Business growth As business is growing, companies can obtain higher amount of loan from the bank

Job satisfaction makes employees have better job performance Reverse causation Job satisfaction Job performance Job satisfaction makes employees have better job performance Job satisfaction Job performance Having good job performance will make an employee satisfied more with a job

Reverse causation Job satisfaction Job performance Reverse causality makes it difficult for researchers to infer the direction of causality between job satisfaction and job performance

Evidence of causality Temporal sequence Concomitant variation Nonspurious association

Evidence of causality Temporal sequence—the appropriate causal order of events. Cause Effect Happened at Time t (e.g. year 2000) Happened at Time t+1 (e.g. year 2001) Cause Effect Happened at Time t-1 (e.g. year 2001) Happened at Time t (e.g. year 2000)

Evidence of causality Concomitant variation—two phenomena vary together. Occur when two events “covary” or “correlate”

Evidence of causality Nonspurious association—an absence of alternative plausible explanations. For example: There is a positive relationship between “ice cream sales” and “murder cases”. When ice cream sales increase, murder cases increase. When ice cream sales drop, murder cases reduce.

EXHIBIT 4.2 The Spurious Effect of Ice Cream

Association does not imply causation a correlation between two variables does not necessarily imply that one causes the other.

Different types of effect Main effect Moderating (interacting) effect Mediating effect

Main Effect The influence of a single independent variable on a dependent variable. Independent Variable (X) Dependent Variable (Y) Main effect

Moderating effect Moderating effect The effect of the independent variable (cause) on the dependent variable (effect) is contingent on the third factor which can either enhance or suppress the effect. The third factor that influences the relationship is called a “moderator”.

Interaction (Moderating) effect Moderator Moderating effect Independent Variable (X) Dependent Variable (Y) Main effect

Number of training sessions Moderating effect Does a training program increase sale performance? Number of training sessions Sale performance

Moderating effect Young employees Old employees

Moderating effect Young employees Old employees

Interaction (Moderating) effect Age of employee “moderates” the effect of training program on sale performance. Only “young employees” who “received more training” tend to have higher sale performance Age of employee Number of training sessions Sale performance

Does using social media at work affect job performance? Social media use at work Job performance

Social media use at work Do employees who have higher job stress benefit more from using social media during work than employees who have lower job stress? Job demands Social media use at work Job performance

Access from PC or Mobile gadgets Social media use at work Do employees who access to social media from PC benefit from using social media during work more than employees who access from mobile gadgets? Access from PC or Mobile gadgets Social media use at work Job performance

Social media is prohibited at work Social media use at work Do employees who work for a firm that allow social media at work obtain more benefit than employee who work for a firm that prohibit social media at work? Social media is prohibited at work Social media use at work Job performance

Access from PC or Mobile gadgets Social media is prohibited at work Social media use at work Job performance Job demands

Mediating effect X does not influence Y directly. But it can influence Y indirectly through a third variable called a “Mediator” M mediates the relationship between X and Y Mediator Independent Variable (X) Dependent Variable (Y)

Mediating effect Full mediation occurs when the direct relationship between the independent variable and the dependent variable disappear when the mediator is included. Partial mediation occurs when the direct relationship between the independent variable and the dependent variable is still strong even when the mediator is included.

Full mediation Strong Strong relationship relationship Mediator Strong relationship Strong relationship Independent Variable (X) Dependent Variable (Y) Weak relationship or no relationship Full mediation

Partial mediation Strong Strong relationship relationship Mediator Strong relationship Strong relationship Independent Variable (X) Dependent Variable (Y) Strong relationship Partial mediation

Example of mediating effect 1 The level of knowledge does not directly explain career success Level of knowledge Career success Positive but weak

Example of mediating effect 1 Conclusion: Ability to apply knowledge is the mechanism that explains why a person with high level of knowledge can be successful in their career. Ability to apply knowledge Level of knowledge Career success Positive but weak Ability to apply knowledge “fully mediates” the link between Level of knowledge and Career success

Example of mediating effect 2 Perceived product quality Buying decision Positive and strong

Example of mediating effect 2 Conclusion: Perceived product quality can influence buying decision directly and indirectly through product satisfaction Product satisfaction Perceived product quality Buying decision Positive and strong Product satisfaction “partially mediates” the link between Perceived product quality and buying decision