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Chapter 3

THEORY BUILDING

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LEARNING OUTCOMES
After studying this chapter, you should
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

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What is a Theory?
Theory A formal, logical explanation of some events that includes predictions or how things relate to one another. Goals of Theory Understanding Predicting

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Research Concepts
Concept (or construct) A generalized idea about a class of objects, attributes, occurrences or process that has been given a name.
Examples: leadership morale gross domestic product assets customer satisfaction market share

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Ladder of Abstraction
Ladder of Abstraction Organization of concepts in sequence from the most concrete and individual to the most general. Abstract Level The level of knowledge expressing a concept that exists only as an idea or a quality apart from an object. Empirical Level The level of knowledge that is verifiable by experience or observation.

Latent Construct A concept that is not directly observable or measurable, but can be estimated through proxy measures.

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EXHIBIT 3.1

A Ladder of Abstraction for Concepts

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EXHIBIT 3.2

Concepts are Abstractions of Reality

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Research Propositions and Hypotheses

Propositions Statements explaining the logical linkage among certain concepts by asserting a universal connection between concepts.
Example: Treating employees better will make them more loyal

employees.

Hypothesis Formal statement of an unproven proposition that is empirically testable.

Example: Giving employees one Friday off each month will result in

lower employee turnover.

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Empirical Testing
Empirical Testing Examining a research hypothesis against reality using data. Variables Anything that may assume different numerical values. The empirical assessment of a concept.

Operationalizing The process of identifying the actual measurement scales to asses the variables of interest.

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EXHIBIT 3.3

Hypotheses Are the Empirical Counterparts of Propositions

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EXHIBIT 3.4

A Basic Theory Explaining Voluntary Job Turnover

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Theory Building
Deductive Reasoning 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 The logical process of establishing a general proposition on the basis of observation of particular facts.

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The Scientific Method

Scientific Method A set of prescribed procedures for establishing and connecting theoretical statements about events, for analyzing empirical evidence, and for predicting events yet unknown. Techniques or procedures used to analyze empirical evidence in an attempt to confirm or disprove prior conceptions.

Suggested steps:
1. Assess relevant existing
2. 3. 4. 5. 6.

7.

knowledge of phenomenon Formulate concepts and propositions State hypotheses Design research to test the hypotheses Acquire empirical data Analyze and evaluate data Propose an explanation of the phenomenon and state new problems raised by the research