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26 Part One: Introduction

Chapter Three: Theory Building 25

Chapter 3

Theory Building

AT-A-GLANCE

I. Introduction

A. What is a theory?

B. What are the goals of theory?

II. Research Concepts, Constructs, Propositions, Variables, and Hypotheses

A. Research concepts and constructs

B. Research propositions and hypotheses

III. Understanding Theory

A. Verifying theory

B. Theory building

IV. The Scientific Method

V. Practical Value of Theories

LEARNING OUTCOMES

1. Define the meaning of theory

2. Understand the goals of theory

3. Understand the terms concepts, propositions, variables, and hypotheses

4. Discuss how theories are developed

5. Understand the scientific method

CHAPTER VIGNETTE: Theory and Practice

What if you went home tonight and turned on the light switch and nothing happened? Most of us would immediately start seeking a logical explanation, and the order would probably depend on our past experience and we would try to determine the cause through a logical thought sequence. Attribution theory, one of the many theoretical models useful to business researchers, can help us explain the world and determine the cause of an event or behavior. Simply put, this theory helps us make sense of events by providing a systematic method to assess and evaluate why things occur.

SURVEY THIS!

Students are asked to review the questionnaire they responded to in Chapter 1, to build a theory about the relationship among at least four questions, and to explain how they think the responses to these questions should relate. They are asked to provide a theoretical explanation for their proposed relationships.

RESEARCH SNAPSHOT

· Social Network Theory

Researchers have developed theories about the links and structure of social networks, complete with constructs and propositions about how linkages are formed. Each entity (individuals or organizations) is referred to as a node, and relationships among them are referred to as ties. When nodes become linked they yield social contacts. Many factors have been identified that create ties and links: family relationships, friendship, professional association, and shared beliefs. These form a social network, and network theory examines these networks. Links can be simple or complex. The value derived from the social network is termed social capital. Businesses are examining ways to utilize social networks to spread information, better serve their customers, and grow profits.

OUTLINE

I. INTRODUCTION

· The purpose of science concerns the expansion of knowledge and the search for the truth.

· Theories are simply generalizations that help us better understand reality.

· Theories allow us to understand the logic behind things we observe.

· If a theory does not hold true in practice, then that theory holds no value.

· What Is A Theory?

· A theory is a formal, logical explanation of some events that includes predictions of how things relate to one another.

· Built through a process of reviewing previous findings of similar studies, simple logical deduction, and/or knowledge of applicable theoretical areas.

· Plays a role in understanding practical research as well as academic or basic business research.

· Helps the researcher know what variables need to be included in the study and how they may relate to one another.

· What Are the Goals of Theory?

· Two issues—understanding and predicting—are the two purposes of theory.

· Accomplishing the first goal allows the theorist to gain an understanding of the relationship among various phenomena.

· That understanding enables us to predict the behavior or characteristics of one phenomenon from the knowledge of another phenomenon.

II. RESEARCH CONCEPTS, CONSTRUCTS, PROPOSITIONS, VARIABLES, AND HYPOTHESES

· Research Concepts and Constructs

· A concept or construct is a generalized idea about a class of objects, attributes, occurrences, or processes that has been given a name.

· Concepts are the building blocks of theory.

· Concepts abstract reality (i.e., concepts express in words various events or objects).

· Concepts may vary in degree of abstraction.

· Ladder of abstraction—organization of concepts in sequence from the most concrete and individual to the most general.

· Moving up the ladder of abstraction, the basic concept becomes more general, wider in scope, and less amenable to measurement.

· The basic or scientific business researcher operates at two levels—on the abstract level of concepts (and propositions) and on the empirical level of variables (and hypotheses).

· Empirical level—level of knowledge that is verifiable by experience or observation.

· Abstract level—level of knowledge expressing a concept that exists only as an idea or a quality apart from an object.

· Latent construct—a concept that is not directly observable or measurable, but can be estimated through proxy measures.

· Researchers are concerned with the observable world (i.e., reality).

· Theorists translate their conceptualization of reality into abstract ideas.

· Things are not the essence of theory; ideas are.

· Concepts in isolation are not theories—to construct a theory we must explain how concepts relate to other concepts.

· Research Propositions and Hypotheses

· Propositions are statements concerned with the relationships among concepts and explain the logical linkage among certain concepts by asserting a universal connection between concepts.

· A hypothesis is a formal statement explaining some outcome and is a formal statement of an unproven proposition that is empirically testable.

· In its simplest form, a hypothesis is a guess.

· A hypothesis is a proposition that is empirically testable, so when on estates a hypothesis, it should be written in a manner that can be supported or shown to be wrong through an empirical test.

· Often apply statistics to data to empirically test hypotheses.

· Empirical testing means that something has been examined against reality using data.

· Variables are anything that may assume different numerical values; the empirical assessment of a concept.

· When the data are consistent with a hypotheses ( hypothesis is supported.

· When the data are inconsistent with a hypothesis ( hypothesis is not supported.

· From an absolute perspective, statistics cannot prove a hypothesis is true.

· Because variables are at the empirical level, variables can be measured.

· Operationalizing—the process of identifying the actual measurement scales to assess the variables of interest.

III. UNDERSTANDING THEORY

· Verifying Theory

· In most scientific situations there are alternative theories to explain certain phenomena, and to determine which is the better theory, researchers make observations or gather empirical data to verify the theories.

· One task of science is to determine if a given theoretical proposition is false or if there are inconsistencies between competing theories.

· Theory Building

· Theory generation can occur at the abstract, conceptual level and at the empirical level.

· Deductive reasoning is the logical process of deriving a conclusion about a specific instance based on a known general premise or something known to be true.

· Inductive reasoning is the logical process of establishing a general proposition on the basis of observation of particular facts.

· Over the course of time, theory construction is often the result of a combination of deductive and inductive reasoning.

IV. THE SCIENTIFIC METHOD

· The scientific method is a set of prescribed procedures for establishing and connecting theoretical statements about events, for analyzing empirical evidence, and for predicting events yet unknown.

· While there is not complete consensus concerning exact procedures for the scientific method, we suggest seven operations may be viewed as the steps involved in the application of the scientific method:

1. Assessment of relevant existing knowledge of a phenomenon

2. Formulation of concepts and propositions

3. Statement of hypotheses

4. Design of research to test the hypotheses

5. Acquisition of meaningful empirical data

6. Analysis and evaluation of data

7. Proposal of an explanation of the phenomenon and statement of new problems raised by research

V. Practical Value of Theories

· Theories allow us to generalize beyond individual facts or isolated situations, providing a framework that can guide managerial strategy by providing insights into general rules of behavior.

QUESTIONS FOR REVIEW AND CRITICAL THINKING/ANSWERS

1. What are some theories offered to explain aspects of your field of business?

Students’ responses will vary depending on their major. Some management theories include Contingency Theory and Balanced Score Card. Opinion Pricing Theory is used in finance. Theory of Reasoned Action and Dual-coding Theory are used in marketing, and economic theories include Demand Theory and Balance of Payment Theory.

2. Reflect on your own social network. How are the nodes in your social network linked? What social capital do you gain from your social network?

Students’ responses will vary, but they will likely discuss their family, friends, religious, and possibly work networks. Social capital examples could be how families support and love one another, friends provide excitement and fun and are there when you might be in need, religious ties might offer a sense of a higher purpose in life, and the social capital derived from work networks might be sense of accomplishment or help in advancing one’s professional career.

3. How do propositions and hypotheses differ?

Propositions are statements concerned with the relationships among concepts. They explain the logical linkage among certain concepts by asserting a universal connection between concepts. A hypothesis is a formal statement explaining some outcome. In its simplest form, a hypothesis is a guess. A hypothesis is a proposition that is empirically testable. So when stating a hypothesis, it should be written in a manner that can be supported or shown to be wrong through an empirical test.

4. How do concepts differ from variables?

A concept (or construct) is a generalized idea about a class of objects, attributes, occurrences, or processes that has been given a name and is the building blocks of theory. Variables are anything that may assume different numerical values and are the empirical assessment of a concept.

5. What does the statement “There is nothing so practical as a good theory” mean? Do you agree with this statement?

Theories allow us to generalize beyond individual facts or isolated situations and provide a framework that can guide managerial strategy by providing insights into general rules of behavior. A good theory allows us to generalize beyond individual facts so that general patterns may be understood and predicted. For this reason it is often said there is nothing so practical as a good theory.

6. The seventeenth-century Dutch philosopher Benedict Spinoza said, “If the facts conflict with a theory, either the theory must be changed or the facts.” What is the practical meaning of this statement?

The two purposes of theory are understanding and predicting. Thus a theory enables us to predict the behavior or characteristics of one phenomenon from the knowledge of another phenomenon. To predict phenomena, we must have an explanation of why variables behave as they do. Theories provide these explanations. In most scientific situations there are alternative theories to explain certain phenomena. To determine which is the better theory, researchers make observations or gather empirical data to verify the theories. If the facts conflict with a theory, most students will likely say that the theory must be changed because we cannot change facts. While that may be true, some “facts” are actually more abstract than others, and how we operationalize our variables, which is the process of identifying the actual measurement scales to assess the variables of interest, might need to be changed. This is especially true in behavioral sciences because the “facts” are not as concrete as those used to test theories in the physical sciences.

7. Compare and contrast deductive logic with inductive logic. Give an example of both.

Deductive reasoning is the logical process of deriving a conclusion about a specific instance based on a known general premise or something known to be true. For example, we know that if heat is applied to water, the temperature of the water will increase. If we know a specific fluid is water, then applying heat to it will cause its temperature to increase. Inductive reasoning is the logical process of establishing a general proposition on the basis of observation of particular facts. For example, every time we applied heat to water, the temperature of the water increased, so applying heat to water will increase the temperature of the water.

8. Find another definition of theory. How is the definition you found similar to this book’s definition? How is it different?

Students’ responses will vary, but most likely, they will use the one provided by Wikipedia (http://en.wikipedia.org/wiki/Theory). The definition of theory provided in this book is a formal, logical explanation of some events that includes predictions of how things relate to one another.

RESEARCH ACTIVITIES

1. [Internet Question] The Chapter Vignette briefly introduced Attribution Theory. Do a Web search regarding Attribution Theory and identify the key characteristics of this theory.

Attribution Theory is used to explain reasons for observed phenomena by attributing it to internal or external causes. The three main dimensions include locus (internal vs. external), stability (change over time or not), and controllability (degree to which individual has control over behavior).

2. [Internet Question] The Meriam-Webster dictionary definition of theory can be found at http://www.meriam-webster.com/dictionary/theory. What is the definition of theory given at this site? How does it compare to the definition given in this chapter?

The definition of theory provided in this book is a formal, logical explanation of some events that includes predictions of how things relate to one another.

3. [Internet Question] The Logic of Scientific Discovery is an important theoretical work. Visit The Karl Popper Web site at http://elm.eeng.dcu.ie/~tkpw/ to learn about its author and his work.

Popper’s work developed one of the main theories of the origin of life. His theory, called Falsificationism, is based on the “idea that science advances by unjustified, exaggerated guesses followed by unstinting criticism.” His basic belief is that only something that can be falsified is considered scientific.

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© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.