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Journal Issue
Volume 12 Issue 1 / Jul 2014  pp1‑74

Editor: Ann Brown

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Editorial for General Issue  pp1‑2

Ann Brown

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Multicollinearity in Marketing Models: Notes on the Application of Ridge Trace Estimation in Structural Equation Modelling  pp3‑15

Jenni Niemelä-Nyrhinen, Esko Leskinen

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Abstract

Abstract: Multicollinearity in Structural Equation Modelling (SEM) is often overlooked by marketing scholars. This is unfortunate as multicollinearity may lead to fallacious path coefficient estimates or even bring about statistical non‑significance of the parameter estimates. Previous empirical illustrations on mitigating the effects of multicollinearity are virtually non‑existent in the literature. The purpose of this paper is to empirically illustrate the problem of multicollinearity in marketing mod els and the use of ridge trace estimation in mitigating the effects of multicollinearity in SEM, using the LISREL program. Two slightly differing ridge estimation procedures are illustrated using real data with a multicollinearity problem: Method A, in wh ich the ridge constant is added manually to all diagonal elements of the correlation matrix of the variables in the model, and Method B, in which the ridge constant is added manually only to the diagonal elements of the correlation matrix of the exogenous and explanatory endogenous variables in the model. In evaluating suitable values of the ridge constant, the ridge trace method is used. It is concluded that ridge trace estimation is an effective way of mitigating the effects of multicollinearity in SEM. With same ridge constant values, both methods produce same point estimates of path coefficients, but Method B produces smaller standard errors of parameter estimates and larger squared multiple correlations than Method A. 

 

Keywords: marketing modelling, multicollinearity, structural equation modelling, ridge trace estimation, LISREL

 

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Bjorn Lantz

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SEM for Experimental Designs: An Information Systems Example  pp27‑40

Saurabh Gupta

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Surveying Adolescents: The Impact of Data Collection Methodology on Response Quality  pp41‑53

Beverly Wright, Alphonso O. Ogbuehi

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Using the Multiple Case Study Design to Decipher Contextual Leadership Behaviors in Indian Organizations  pp54‑65

Veena Vohra

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Theory Testing Using Case Studies  pp66‑74

Ann-Kristina Løkke, Pernille Dissing Sørensen

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