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Business Research Methods

Chapter 3. Theory Building

Dr. Werner R. Murhadi

http://www.wernermurhadi.wordpress.com/

After studying this chapter, you should be able to

1. Define the meaning of theory

2. Understand the goals of theory

3. Understand the terms concepts, propositions,

variables, and hypotheses

4. Understand the scientific method

Theory

• Students sometimes think their classes or course

material are “too theoretical” or lacking “practical

application.”

• Theories are simply generalizations that help us

better understand reality. If a theory does not

hold true in practice, then that theory holds no

value.

• A theory is a formal, testable explanation of

some events that includes explanations of

how things relate to one another.

Two Purposes Of Theory

• Understanding, to gain an understanding

of the relationship among various

phenomena.

• Prediction, a theory enables us to predict

the behavior or characteristics of one

phenomenon from the knowledge of

another phenomenon.

Concept (or Construct)

• A generalized idea about a class of

objects, attributes, occurrences, or

processes that has been given a name

• Concept are abstraction of reality

• “leadership,” “productivity,” and “morale”

• “asset” and “inflation”

Vegetation

Fruit

Banana

Reality

Incre

asin

gly

mo

re a

bstr

act

A Ladder Of Abstraction

For Concepts

Asset

Plant Machinery

Punch Press

Reality

CONCEPTS

OBSERVATION OF OBJECTS

AND EVENTS (REALITY)

Empirical

Level

Abstract

Level

Concepts are Abstractions of Reality

Scientific Business Researchers

Operate at Two Levels

• Abstract level

– concepts

– Propositions (are statements concerned with the

relationships among concepts. A proposition explains the

logical linkage among certain concepts by asserting a

universal connection between concepts, but is quite

general and not really testable)

• Empirical level

– variables

– hypotheses

Definitions

• Abstract level -In theory development, the

level of knowledge expressing a concept

that exists only as an idea or a quality

apart from an object.

• Empirical level -Level of knowledge

reflecting that which is verifiable by

experience or observation.

Abstract Level

• Concepts abstract reality.

• Propositions are statements concerned

with the relationships among concepts.

Always makes

four sales calls

a day

Dollar bonus for

sales volume

over quota

Concept B(Habits)

Hypothesis at Empirical Level

Concept A(Reinforcement)

Proposition at Abstract Level

• A hypothesis is a proposition that is

empirically testable. It is an empirical

statement concerned with the relationship

among variables.

• A variable is anything that may assume

different numerical values.

Theory Building A Process Of

Increasing Abstraction

Theories

Propositions

Concepts

Observation of objects

and events (reality ) Incre

asin

gly

more

abstr

act

Deductive Reasoning

• The logical process of deriving a

conclusion from a known premise or

something known to be true.

– We know that all managers are human

beings.

– If we also know that John Smith is a manager,

– then we can deduce that John Smith is a

human being. D

Inductive Reasoning

• The logical process of establishing a

general proposition on the basis of

observation of particular facts.

– All managers that have ever been seen are

human beings;

– therefore all managers are human beings.

I

Scientific Method

The use of a set of prescribed procedures

for establishing and connecting theoretical

statements about events and for predicting

events yet unknown.

Assess

relevant

existing

knowledge

Formulate

concepts &

Propositions

Statement

of

Hypotheses

Design

research

Acquire

empirical

data

Analyze &

evaluate

data

Provide

explanation-

state new

problem

The Scientific Method:

An Overview

Theory and Poems

A fact without a theory

Is like a ship without a sail,

Is like a boat without a rudder,

Is like a kite without a tail.

A fact without a figure is a tragic final act,

But one thing worse in this universe

Is a theory without a fact.