Theory Building

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Business research method

Transcript of Theory Building


    Learning outcomes:To understand the goals of theoryTo define the meaning of theoryTo understand the terms concept, proposition, variable and hypothesisTo highlight the possibility of discussing concepts at various levels of abstractionTo understand the scientific methodTo discuss how theories are generated

  • The role of theory in researchthe purposes of science:- expansion of knowledge- discovery of truth

    theory building is the means to achieve these purposes

    theory:- a coherent set of general propositions (statements) to explain relationships among certain observed phenomena- allows generalizations beyond individual facts

    aims of theory building:- explanation examples: what produces inflation, the causes of unemployment- prediction (if A happens B will follow)example: if money supply increases by x %, inflation goes up by z% (ceteris paribus)

  • The role of theory in researchTheory building: attempting to construct and evaluate explanatory statements about what is going on around us.some common sense examples:- punishment deters criminal acts- improved training provision increases labor productivity

    Differences between common sense and science:- structure: level of sophistication- evaluation: haphazard in common sense, rigorous in science

  • The role of theory in researchconcept: - a generalized idea about a class of objects- an abstraction of reality - basic unit of theoriesexamples: leadership, productivity, inflation, GDP

    a ladder of abstraction:- sequence of concepts from the most concrete to the most general example:banana - fruit - vegetation

    research operates both at the abstract level of concepts (ideas abstracted from an object)


    at the empirical level (experience of reality)

  • The role of theory in researchExample:abstract level: older workers prefer different rewards than younger onesconcepts: age, reward preferenceempirical level: observation of individuals preferences with different ages objects: individuals, salary, retirement plans

  • The role of theory in researchproposition: - a statement among concepts- create logical linkage among concepts- asserts universal connections

    example:decreasing interest rates increases employmentTheory building is a process of increasing abstraction

  • The role of theory in researchscientific method- techniques used to analyze empirical evidence in order to confirm or disprove propositions- no consensus concerning the exact procedures - most of the discussions focus on empirical verification of theories

    hypothesis- proposition that is empirically testable

    variable:- empirically observable occurrence of a concept

    example:at the abstract level:theory: reinforcements will increase habit strengthconcepts: reinforcement, habitsat the empirical levelhypothesis: bonus payment will be associated with sales volumevariable: bonus payment, sales

  • The role of theory in researchBusiness research gathers facts to verify theories

    facts and theories:- facts are observable data- theories are structures of concepts to explain facts- facts and theories are at different levels of abstraction- facts do not change even when scientists debate rival theories to explain them

    generation of theories- deductive reasoning: a logical process of deriving a conclusion from a known premise (e.g., all managers are human beings)

    - inductive reasoning: the logical process of establishing a general proposition on the basis of observation of particular facts (e.g., all managers that have ever been seen are human beings)

  • The role of theory in researchdeductive and inductive reasoning are often combined in theory buildingTesting of a theory- concepts and propositions are not readily observable- a concept can have different meanings (e.g., managerial level -either by education, or income)- rules should be made for making observations- creating variables (indicators, measures): empirically observable instances of the concepts- operationalization: rules for using indicators to make observations (e.g., organizational effectiveness and profit)

  • The role of theory in research

  • The role of theory in researchSteps in the application of scientific method:- assessment of relevant existing knowledge- formulation of concepts and propositions- statement of the hypotheses- design the research to test the hypotheses- acquisition of meaningful empirical data- analysis and evaluation of data- provide explanation and state new problems raised by the research

  • A Question for Critical ThinkingIn the nine-dot square below, connect all nine dots using no more than four straight lines and without lifting the pencil from the paper.What analogy can you make between the solution of this problem and the definition of a business problem?

  • Theories are nets cast to catch what we call the world: to rationalize, to explain, and to master it. We endeavour to make the mesh ever finer and finer. (Karl Popper, The Logic of Scientific Discovery)

    If facts conflict with a theory, either the theory must be changed or the facts. (Benedict Spinoza)

    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 the universeis a theory without a fact. (George Shultz)

  • Suggested Reading:Robert Pirsigs book: Zen and the Art of Motorcycle Maintenance(excerpt which can be found in Zikmunds book, pp. 48-50.)

    A motorcycle mechanic who honks the horn to see if the battery works is informally conducting a true scientific experiment. He is testing a hypothesis by putting the question to nature.

  • The role of theory in researchAt the abstract level:concept-generalized idea about a class of objects resulted from abstraction of reality- building block of theoriesproposition- a statement among concepts creating logical linkages among conceptstheory- a set of concepts connected by propositions to explain relationships among certain phenomena

    At the empirical level:variable- empirically observable occurrence of a concepthypothesis- proposition that is empirically testablescientific method:- techniques to analyze empirical evidence in order to confirm or disprove theories


    Learning outcomes:

    To understand that proper problem definition is essential for effective business research.To discuss how formulation of research questions and hypotheses adds clarity to the problem definition.To explain the purpose of the research proposal.To outline a research proposal.

  • Problem definitionimportance of proper problem definition- managers realize a problem but may have only vague ideas about the situation (sales decreases, morale declines at the company, job turnover goes up)- business researcher should provide the clear definition of the problemproblem definition indicates a specific business decision area that will be clarified by answering the research questions

    Steps in problem definition1. ascertain the decision makers objectives- unfortunately, objectives are seldom clearly given to the researcher - objectives should be extracted by the researcher (questioning the manager or exploratory research)

  • Problem definition2. Understanding the background of the problem- gathering background details about the problem (e.g., from other experienced managers)3. Isolating and identifying the problem not the symptoms- easier to say than to do(an example: of a 20-year old neighborhood swimming association- symptoms: new water park moved into the neighborhood- problem definition based on symptoms: residents prefer the expensive water park- true problem: demographic changes, children have grown up)

  • Problem definition4. Determine the unit of analysis- what is the level of investigation (e.g., individual employees)

    5. Selection of the relevant variables - variable: something which is empirically observable and can take different values(e.g., salaries of office workers in the company)- categorical variable can take limited number of distinct values (dummy variables: 0,1)- continuous variable: can take infinite number of values- dependent variable: that is to be explained- independent variable: expected to influence the dependent variable

  • Problem definition6. State research hypotheses and research objectivesA. hypothesis: empirically testable propositionexamples:H1: voluntary turnover will be higher among employees who perceive themselves to be inequitably paid than among employees who perceive themselves to be equitably paidH2: increasing competition in the job market increases turnoverH3: participation-oriented management style increases job satisfaction and decreases turnover

    B. research objective: the purpose of the research in measurable terms; the exact definition what the research should accomplishexamples:- To study whether perceived inequitable payment has a negative effect on job turnover - To determine the extent to which increasing competition affects job turnover- To clarify whether participation-oriented management style decreases job turnover

  • Research proposalThe research proposala written statement of the research design that includes an explanation of the purpose of the study and a detailed outline of a particular research methodology

    It should consist of the following parts:

    1. The intended title of the dissertation2.The aim of the underlying research as well as the clearly stated motivation for the research3. The preliminary structure (table of contents) of thedissertation4. Literature review, i.e. review of the state of the art in the literature5. Outline of research design and motivation for the research methodology to be applied6. Data sources and description of the sample design7. Time schedule of the research 8. List of references

  • Evaluate the statement of the business problem in each of the following situations:

    1. The producer of the television show:We have a problem: The programs ratings are low. We need to learn how to improve our ratings.

    2. A soft drink manufacturer: The problem is that we do not know if our bottlers are more satisfied with us than our competitors bottlers are with them.

    3. A womens magazine: Our problem is to document the demographic changes that have occurred in recent decades in the lives of women and to put these changes in historic perspective ; to examine several generations of American women through most of this century, tracking their roles as students, workers, wives, and mothers and noting the changes in timing, sequence, and duration of these roles; to examine at what age and for how long a woman enters each of the various stages of her life: school, work marriage, childbearing, divorce. This documentation will be accomplished by analyzing demographic data over several generations.

  • If you do not know where you are going to, any road will take you there. (adage)