THEORETICAL FRAMEWORK and Hypothesis Development Business Research Methods MGMT 381

Theory An interrelated set of statements of relationships whose purpose is to explain or predict Device for interpreting, criticizing established laws, modifying them, guiding to discovery of new theories/generalizations Purpose of theory: to a) explain or b) predict of occurrences of certain phenomena and to c) highlight the important concepts and relationships in a problem situation

How are theories generated? Deductive reasoning (conclusion derives from something known to be true) 1.Identify problem 2.Define purpose 3.Develop research questions 4.Conduct review of literature 5.Develop hypotheses 6. Determine measures 7. Collect data 8. Analyze data 9. Interpret data

How are theories generated? Science is accomplished by deduction

How are theories generated? Inductive reasoning (conclusion derives on the basis of observation of phenomena or facts) We observe cars on a street and note that 10 cars in a raw are white. But this does not mean 11th car will be white Why does this happen? Develop hypothesis. Test hypothesis.

Where do original ideas come from? Intensive case study investigation Rules of thumb Hypotheses testing

Good Theory Guides the study Limits what the study wants to achieve Suggests the most appropriate research design Provides a framework for the study

Theoretical Framework A conceptual framework of how a researcher theorizes the relationships among different phenomena and explains these phenomena and why they are associated with each other Identifies several factors and variables that are important to the problem at hand

Theoretical Framework It is a logically developed, described and elaborated network of associations among variables identified through interviews, observations and literature review

Theoretical Framework Identifies the relationships among the variables considered important to the study of a problem Explains the theory underlying these relationships, describes the nature and direction of these relationships Foundation of the entire research project

The process of building theoretical framework Introducing definitions of the concepts examined or variables Developing a conceptual model that provides a descriptive representation of the theory developed Introducing a theory that provides an explanation of relationships between the variables in the model

Components of the Theoretical Framework Variables relevant to the study Relationships among variables Nature and direction of the relationship based on previous research. Positive ? Negative? Explanation of why we would expect these relationships to exist A schematic diagram of the theoretical framework to visualize the theorized relationships (visual model)

Main types of variables A variable is anything that can take on differing or varying values Dependent (criterion) (DV) Independent (predictor) (IV) Moderating or explanatory - has a strong influence on the IV-DV relationship, modifies this relationship Intervening or mediating- temporarily influences the DV and IV relationship Extraneous

The relationships between independent and dependent variables Cultural Values Behavior IV DV Number of Books Reading Ability IV DV

The relationships between IV, DV and moderating variables Number of Books Reading Ability DV Parents’ Literacy Moderating variable

The relationships between IV, DV and moderating variables Quality of Products Purchases IV DV Consumers’ Needs Moderating variable

The relationships between IV, DV, intervening and moderating variables Intervening variable Quality of Products Purchases WEATHER IV DV Consumers’ Needs Moderating variable

Model Formalized (visual) representation of a theoretical framework Designed through the use of symbols or physical analogues Represents theory so that theory can be tested, examined and analyzed Simplified versions of phenomena under study

Example of a Model Cost Competitor’s price Price Setting Target profit IV Competitor’s price IV Price Setting DV Target profit IV Target market IV

Example of a Model Instructor Student Effort Student Performance IVs IV Instructor DV Student Effort MV IV Student Performance Technology Study Time IV Student Abilities IV

Propositions and Hypotheses Statements about concepts which may be judged as true or false if it refers to observable phenomena When a proposition is formulated for empirical testing it is called a hypothesis A concrete statement of an abstract relationship described in a theory (e.g. sales and economic hardship are related) Relational (relationships between two or more variables) Explanatory or causal (one concept explains or causes the other one)

Hypotheses Guide the direction of the study Limit what we study Suggest the most appropriate research design Provide a framework to organize the conclusions Play an important role in the development of theory Can be developed from the theoretical framework

Definition of Hypothesis A hypothesis is an educated guess about a problem’s solution Example: If the pilots are given adequate training to handle a plane, air safety violations will be reduced

Directional Hypotheses If in stating the relationships between two variables or comparing two groups terms, such as ‘positive’, ‘negative’, ‘more than’, ‘less than’ and ‘the like’ are used then these hypotheses are directional. Examples: Employees who are more healthy take sick leave less frequently The greater the stress on the job, the lower the job satisfaction

Non-directional Hypotheses If there is no indication of the direction of the relationships or differences then these hypotheses are non-directional Examples: There is a relationships between age and job satisfaction. There is a difference between the work ethic values of American and Asian employees.

Null Hypothesis Null Hypothesis (Ho)–the statement expressed as no (significant) relationships between the 2 variables or no (significant) differences between 2 groups exist Null hypothesis is set up to be rejected in order to support an alternative hypothesis

Alternative Hypothesis Alternative Hypothesis (H1) –is the opposite of the null: statement expressing a relationship between 2 variables or indicating differences between 2 groups Ho is rejected if the results do not meet the p<0.05 level of significance

Examples of Hypotheses Null Hypothesis: There is no relationship between stress experienced on the job and the job satisfaction of employees. Alternative Hypothesis: There is a relationships between stress experienced on the job and the job satisfaction of employees.

Why do we develop hypotheses? Suggest variables to be included in the research design Provide possible answers to the research questions Allow researchers to speculate about possible research question answers Example: Housing sales decrease because the level of competition is extremely high Imply problem (decreased housing sales)

How to develop hypotheses? Depends on information available: 1) Information from previous research 2) Information from economics, marketing, social, psychological impacts of pricing on…, etc. 3) Manager’s experience with a problem

When developing hypotheses Need to look at three elements: a) Research question(s) b) Hypothesis c) Boundaries of study Example: Research question: “Will our TV ad attract clients? Hypothesis: “Yes, it will attract” Example: Boundaries limit the research process, e g. research is limited to only female and male, a specific geographical region, a certain product. Boundaries depend on the research purpose and influence the value of the answer.