SEM Made Simple

Zainudin Awang (2015). MPWS Publisher

CHAPTER 6
ANALYZING THE MEDIATING VARIABLE
IN A MODEL
Sometimes the research questions intend to address the effect of a mediating variable in the
relationship between an independent variable and its corresponding dependent variable in a
model. Diagram below illustrates the position of a mediator in the relationship between
independent variable and its corresponding dependent variable.

Direct Effect
from IV to DV

Indirect Effect
Through Mediator

First of all, the direct effect of independent variable on dependent variable is significant. When
the mediator variable M enters the model, the direct effect would be reduced since some of the
effect has shifted through the mediator. If it is reduced but still significant, the mediation effect
here is called “partial mediation”. However, if the direct effect is reduced and no longer
significant, then the mediation is called “complete mediation”.

The modeling of a mediator variable in AMOS graphic is illustrated in Figure 1.

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When analyzing the mediator, there are two effects involved namely direct effect and indirect
effect. The direct effect is the effect from independent variable directly to dependent variable,
while the indirect effect is the effect from independent variable to dependent variable that goes
indirectly through the mediating variable.

Mediating Indirect Effect

Variable: M
Indirect Effect
Direct Effect

Independent Dependent
Variable: X1 Variable: Y

Figure 1: Modeling the mediator in the structural model

Figure 1: Let X1 be an independent variable; Let Y be a dependent variable, and let M be a

mediator in the model. The single-headed arrow indicates a causal effect of X1 on Y, X1 on M,
and M on Y. In this case, M is modeled as a mediator variable in AMOS graphic. In the
diagram, the researchers can examine the direct effect of X1 on Y, the direct effect of X1 on M,
and the direct effect of M on Y.

In this model, the researchers will examine the direct effect and indirect effect of X1 on Y. If
the direct effect of X1 on Y is reduced, and the indirect effect (through M) is significant, then
M is said to play a mediating role in linking X1 to Y indirectly.

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6.1 ANALYZING THE MEDIATING EFFECTS USING AMOS

GRAPHIC FOR THE OBSERVED VARIABLES

Firstly, we begin by modeling the simple effect of X1 on Y as shown in Figure 2. We test the
direct effect of X1 on Y as shown in Figure 3. The output in Table 1 shows B1 is 0.36 and it has
a significant effect on Y (p-value < 0.001).

Secondly, we enter the mediator variable M into the model as shown in Figure 4. Now we test
the direct effect of X1 on Y as shown in Figure 5. The output in Table 2 shows the coefficient
value for B1 is reduced from 0.360 to 0.103 when M enters the model, and the direct effect of
B1 on Y is no longer significant (p-value = 0.062). Here, the requirement for complete
mediation is met. Finally, we need to test the hypothesis for B2 and B3. If these two hypotheses
are significant, then the type of mediation is complete mediation.

e1
1

X1 Y

Figure 2: Modeling the direct effect of X1 on Y

e1
1
4.90, 1.36 3.87
.36
X1 Y

Figure 3: The result of direct effect of X1 (The Beta Coefficient is 0.36)

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Table 1: The direct effect of X1 on Y is significant (Beta Coefficient 0.361)

Variable Variable Estimate S.E. C.R. P-Value Result
Y <--- X1 0.360 0.050 7.235 0.001 Significant

As has been said earlier, the test for mediator is only meaningful only if the direct effect is
statistically significant. The mediator variable is included into the model as shown in Figure 4.
Bear in mind to draw in triangular form so that the direct effect and indirect effect could easily
be identified. Once the model is executed, the result for path coefficient (standardized
coefficient) is shown in Figure 5.

Mediator M 1
enters the model M e2

e1
1

X1 Y

Figure 4: Modeling the mediator M in AMOS Graphic for observed variable

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3.10

1
M e2

.53 .31
e1
1
4.90, 1.36 3.01
.10
X1 Y

Figure 5: The AMOS output showing Regression Coefficient between variables.

Table 2: The Path Coefficient and its significance

Estimate S.E. C.R. P-Value Result
Y <--- X1 0.103 0.066 1.547 0.062 Not significant
M <--- X1 0.527 0.041 12.991 0.001 significant
Y <--- M 0.312 0.050 6.282 0.001 significant
***Observe that the direct effects of X1 is reduced from 0.36 to 0.1 after M entered the model

The Hypotheses Required in Determining the Mediation Effects

Hypothesis 1: X1 has significant and direct effects on Y

Table 2a: The hypothesis testing for a direct effect of X1 on Y

Estimate S.E. C.R. P-Value Result
Y <--- X1 0.103 0.066 1.547 0.062 Not significant
(Beta coefficient is reduced from 0.360 in Table 1 to 0.103 in Table 2)
Result: Hypothesis 1 is not supported.

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Hypothesis 2: X1 has significant and direct effects on M

Table 2b: The hypothesis testing for the causal effect of X1 on X2

Estimate S.E. C.R. P-Value Result
M <--- X1 0.527 0.041 12.991 0.001 Significant

Result: Hypothesis 2 is supported

Hypothesis 3: M has significant and direct effects on Y

Table 2c: The hypothesis testing for the causal effect of X2 on Y

Estimate S.E. C.R. P-Value Result
Y <--- M 0.312 0.050 6.282 0.001 Significant

Result: Hypothesis 3 is supported.

Conclusion: M is a mediating variable in the relationship between X1 and Y.

The type of mediation here is a called a “complete mediation” since the direct effect of X1 on
Y is no longer significant after M entered the model (Hypothesis 1). Instead, the indirect
effect is significant. Thus, X1 has an indirect effect on Y through the mediator variable M

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6.2 ANALYZING THE MEDIATING EFFECTS FOR LATENT

CONSTRUCTS
The concept of mediation in latent constructs is equivalent to that of the observed variables as
discussed above. First of all, we need to show that the direct effect of X1 on Y is significant.

e14
1
Y1 e10
1 1

1
Y2 e11

Y
X1 1
Y3 e12

1 1
Y4 e13
X15 X14 X13 X11

1 1 1 1

e5 e4 e3 e1

Figure 6: Modeling the direct effect of X1 on Y for latent constructs

The output when the model in Figure 6 is run is shown in Figure 7.

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.78

e14 .11
1
Y1 e10
1 1.00
.06
.47 1.03
1
Y2 e11
.87 Y .17
1.10
X1 1
Y3 e12
1.15
1.61 1.00 .87
1.42 1.53
1
Y4 e13
Fitness Indexes
X15 X14 X13 X11 1.ChiSq = 55.676
2.df = 19
1 1 1 1 3.ChiSq/df = 2.930
.19 .28 .23 .88 4.GFI = .956
5.AGFI = .917
e5 e4 e3 e1 6.CFI = .986
7.RMSEA = .078

Figure 7: The result shows the direct effect of X1 on Y (Beta Coefficient 0.87)

Table 3: The direct effect of X1 on Y is significant (Beta Coefficient 0.870)

Beta Estimate S.E. C.R. P-Value Result

Y <--- X1 0.870 0.104 8.365 0.001 Significant

The analysis for mediation begins by showing that the direct effect of X1 on Y is significant.
The direct effect is measured through beta coefficient. In this case, B1 is significant.

When the mediating variable M enters the model, the value of path coefficient for X1 is
expected to reduce, or in other words the direct effect of X1 on Y would be reduced when the
mediator enters the model.

The new model when M is entered as a mediator is presented in Figure 8.

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e6 e7 e8 e9

1 1 1 1

X21 X22 X23 X24

1
e15 M
e14
1
Y1 e10
1 1

1
Y2 e11

Y
X1 1
Y3 e12
1
1
Y4 e13
X15 X14 X13 X11

1 1 1 1

e5 e4 e3 e1

Figure 8: Modeling the mediator for latent construct M in AMOS Graphic.

In the above diagram, X1, M, and Y are latent constructs. The study is interested to prove that
the construct M is mediating the relationship between construct X1 and construct Y.

The Regression Weight estimates for the model are presented in Figure 9 while the text output is
presented in Table 4.

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.45
.19 .09 1.39

e6 e7 e8 e9

1 1 1 1

X21 X22 X23 X24

1.00 .81
1.00
.64

1 .75
.77 e15 M
e14 .11
1
.94 .79 Y1 e10
1 1.00
.06
.48 1
1.03 Y2 e11
.68 Y .17
1.10
X1 1
Y3 e12
1.59 1.15
1.00 .87
1.40 1.51
1
Y4 e13
Fitness Indexes
X15 X14 X13 X11 1.ChiSq = 151.309
2.df = 50
1 1 1 1 3.ChiSq/df = 3.026
.19 .28 .23 .87 4.GFI = .929
5.AGFI = .919
e5 e4 e3 e1 6.CFI = .972
7.RMSEA = .079

Figure 9: The AMOS output showing Regression Weights between constructs

Note: All fitness indexes achieved the required level

***Observed that the value of direct effect linking X1 to Y is reduced from 0.87 to 0.68.

Table 4: The Path Regression Coefficient and its significance

Beta Estimate S.E. C.R. P-Value Result

Y <--- X1 0.680 0.110 6.202 0.001 Significant

M <--- X1 0.941 0.108 8.712 0.001 Significant
Y <--- M 0.787 0.161 4.888 0.001 Significant

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The Hypotheses Required in Determining the Mediation Effects

Hypothesis 1: X1 has significant and direct effects on Y

Table 4a: The hypothesis testing for the causal effect of X1 on Y

Beta Estimate S.E. C.R. P-Value Result
Y <--- X1 0.680 0.110 6.202 0.001 Significant
(The direct effects has reduced after mediator entered the model from 0.868 in Table 4 to 0.682 in Table 6)

Hypothesis 2: X1 has significant and direct effects on M

Table 4b: The Hypothesis Testing for the Causal Effect of X1 on X2

Beta Estimate S.E. C.R. P-Value Result
M <--- X1 0.941 0.108 8.712 0.001 Significant

Hypothesis 3: M has significant and direct effects on Y

Table 4c: The Hypothesis Testing for the Causal Effect of M on Y

Beta Estimate S.E. C.R. P-Value Result
Y <--- M 0.787 0.161 4.888 0.001 Significant

Conclusion: The construct M does mediate the relationship between X1 and Y.

The type of mediation here is a called “partial mediation” since the direct effect of X1 on Y is
still significant after the mediator variable M entered the model even though the path
coefficient for X1 is reduced from 0.87 (in Figure 7) to 0.68 (in Figure 9). In this case, X1 is
both significant direct effect on Y and also significant indirect effect on Y through the mediator
variable namely M.

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6.3 ANALYZING THE MEDIATOR IN A COMPLEX MODEL

In practice researchers are working with complex models, thus their theoretical framework in
AMOS Graphic is also complicated. Thus, analyzing the mediator in a complex model is quite
challenging for novice researchers. At all times, the researcher needs to focus on the concept of
triangle as stated in Figure 1 which indicates the direct effect and indirect effect when
analyzing the mediator.

The direct effect is the effect that goes directly from exogenous construct to endogenous
construct, while the indirect effect is the effect from exogenous construct to endogenous
construct that goes indirectly through the mediator in the model.

The following example is based on Structural Model in Figure 10.

Figure 10 illustrate the position of mediator construct namely customer satisfaction in the
model. In this example, the researcher is interested to assess the role of Customer Satisfaction
as a mediator in the following relationships:

i) The relationship between Service Quality and Customer Loyalty

ii) The relationship between Corporate Image and Customer Loyalty

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The structural model shows there are two

mediating roles of Customer Satisfaction:
i) Service Quality to Customer Loyalty
ii) Corporate Image to Customer Loyalty

Figure 10: The Standardized Regression weights for every path in the model

TESTING THE MEDIATION EFFECT OF CUSTOMER SATISFACTION IN THE

RELATIONSHIP BETWEEN SERVICE QUALITY AND CUSTOMER LOYALTY

First of all, obtain the standardized regression weights and the probability values which
indicate the significance for the respective path (Figure 10). The required information is given
in Table 9. Draw the triangle as shown in Figure 11.

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Table 9: The standardized regression weights and its significance for each path

Standardized
Construct Path Construct P-Value Result
Estimate
Customer_Satisfaction <--- Service_Quality 0.51 0.001 Significant
Customer_ Loyalty <--- Customer_Satisfaction 0.58 0.001 Significant
Customer_ Loyalty <--- Service_Quality 0.22 0.001 Significant

THE PROCEDURE FOR TESTING MEDIATION

1) The Indirect Effect = 0.51 x 0.58 = 0.296

2) The Direct Effect = 0.22
3) Since Indirect Effect > Direct Effect, the mediation occurs
4) Both indirect path (SQ to CS and CS to CL) are significant
5) Type of mediation here is Partial Mediation since the Direct
Effect is still significant after mediator enters the model

Figure 11: The procedure for testing mediation in a complex model

The main hypothesis statement for testing a mediator: Ha: Customer Satisfaction mediates
the relationship between Service Quality and Customer loyalty

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Table 10: The results of Mediation Test

Hypothesis Statement for Path Analysis Results on

Estimate P-Value
(three sub-hypothesis) Hypothesis

Ha1: Service Quality has significant effect on customer satisfaction 0.51 0.001 Supported

Ha2: Customer Satisfaction has significant effect on Customer Loyalty 0.58 0.001 Supported

Ha3: Service Quality has significant effect on Customer Loyalty 0.22 0.001 Supported

TESTING THE MEDIATION EFFECT OF CUSTOMER SATISFACTION IN THE

RELATIONSHIP BETWEEN CORPORATE IMAGE AND CUSTOMER LOYALTY

First of all, obtain the standardized regression weights and the probability values which
indicate the significance for the respective path (Figure 10). The required information is given
in Table 10. Draw the triangle as shown in Figure 12.

Table 11: The standardized regression weights and its significance for each path

Standardized
Construct Path Construct P-Value Result
Estimate
Customer_Satisfaction <--- Corporate_Image 0.27 0.001 Significant
Customer_ Loyalty <--- Customer_Satisfaction 0.58 0.001 Significant
Customer_ Loyalty <--- Corporate_Image 0.08 0.106 Not Significant

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THE PROCEDURE FOR TESTING MEDIATION

1) The Indirect Effect = 0.27 x 0.58 = 0.157

2) The Direct Effect = 0.08
3) Since Indirect Effect > Direct Effect, the mediation occurs
4) Both indirect path (CI to CS and CS to CL) are significant
5) Type of mediation here is Complete Mediation since the Direct
Effect is not significant after mediator enters the model

Figure 12: The Standardized Regression Weights for the model

The main hypothesis statement for testing a mediator: Hb: Customer Satisfaction mediates
the relationship between Corporate Image and Customer loyalty

Table 12: The results of Mediation Test

Hypothesis Statement of Path Analysis Results on Hypothesis

Estimate P-Value
(three sub-hypothesis)

Hb1: Corporate Image has significant effect on Customer Satisfaction 0.202 0.001 Supported

Hb2: Customer Satisfaction has significant effect on Customer Loyalty 0.609 0.001 Supported

Hb3: Corporate Image has significant effect on Customer Loyalty 0.065 0.106 Not Supported

The results of hypothesis testing in Table 12 indicate that Customer Satisfaction does mediate
the relationship between Corporate Image and Customer Loyalty. Thus the type of mediation
here is full mediation since the direct effect is no longer significant after the mediator enters
the model.

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6.4 MEDIATION TEST: CONFIRMING THE RESULT THROUGH

BOOTSTRAPPING
Lately, there are demands from many quarters, including the examiners that
researchers need to re-confirm the results of their mediation tests using the resampling
procedure called Bootstrapping. This is especially so for testing the indirect effect.
Bootstrapping is the method of sampling with replacement whereby one instructs the algorithm
to take the sample of size n from the existing dataset. The number of re-sampling could be
between 500 to 1000 times. The algorithm would compute the mean and standard error for
every sample. From re-sampling process, the algorithm develops sampling distribution for the
estimates.
From the sampling distribution, the total effect, the direct effect, and also the indirect
effect between constructs are estimated. Finally the 95% confidence interval values for total
effect, direct effect, and indirect effect will be tabulated. The algorithm would tabulate the
lower limit and the upper limit as well as the two-tailed significant values for the effects. Using
these values, the researcher could compare the mediation test results with the bootstrapping
results. Most of the times, the results are equivalent. However, for any contradictory, the
bootstrapping result will be applicable.
Now let us perform the bootstrapping procedure to confirm the mediation test for the
above example. In this case, we choose to obtain 1000 bootstrap sample and bias corrected
95%. We would obtain the standardized indirect effect together with its significance level
and also the standardized direct effect together with its significance level. Finally, we would
like to compare these results with the mediation test conducted using conventional procedure.
(Remember: The significance of indirect effect indicates the mediation exists, and the
significance or insignificance of direct effects indicate the type of mediation)

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Figure 13: The Standardized Regression weights for every path in the model

Table 13: Bootstrapping Results for Service Quality to Customer Loyalty

The Standardized Indirect Effects: Service Quality to Customer Loyalty = 0.296

Service Customer Customer

Quality Satisfaction Loyalty
Customer
.000 .000 .000
Satisfaction
Customer .296 .000
.000
Loyalty

The indirect effect of SQ on CL

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The P-value (Indirect Effects) Service Quality to Customer Loyalty = 0.001

Service Customer Customer

Quality Satisfaction Loyalty
Customer
... ... ...
Satisfaction
Customer
.001 ... ...
Loyalty

***The significance of indirect effects indicates moderation exists between SQ and CL

The Standardized Direct Effects: Service Quality to Customer Loyalty = 0.215

Service Customer Customer

Quality Satisfaction Loyalty
Customer
.511 .000 .000
Satisfaction
Customer
.215 .579 .000
Loyalty

The P-value (Direct Effects) Service Quality to Customer Loyalty = 0.002

Service Customer Customer

Quality Satisfaction Loyalty
Customer
.003 ... ...
Satisfaction
Customer
.002 .002 ...
Loyalty

Table 14: The Summary – The Significance of direct and indirect effects

Indirect Effect Direct Effect

Bootstrapping Results .296 .215
Bootstrapping P-Value .001 .002
Result Significant Significant
Type of Mediation Partial Mediation since direct is also significant

Based on the results in Table 14, the researcher can conclude that the results of bootstrapping is
consistent with the results of mediation test in Table 10

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Table 15: Bootstrapping Results for Corporate Image to Customer Loyalty

The Standardized Indirect Effects: Corporate Image to Customer Loyalty = 0.154

Corporate Customer Customer

Image Satisfaction Loyalty
Customer
.000 .000 .000
Satisfaction
Customer
.154 .000 .000
Loyalty

The P-value (Indirect Effects) Corporate Image to Customer Loyalty = 0.001

Corporate Customer Customer

Image Satisfaction Loyalty
Customer
... ... ...
Satisfaction
Customer
.001 ... ...
Loyalty

***The significance indirect effects indicate the moderation exists between CI and CL

The Standardized Direct Effects: Service Quality to Customer Loyalty = 0.081

Corporate Customer Customer

Image Satisfaction Loyalty
Customer
.266 .000 .000
Satisfaction
Customer
.081 .579 .000
Loyalty

The P-value (Direct Effects) Corporate Image to Customer Loyalty = 0.095

Corporate Customer Customer

Image Satisfaction Loyalty
Customer
.001 ... ...
Satisfaction
Customer
.095 .002 ...
Loyalty

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Table 16: The Summary – The Significance of direct and indirect effects

Indirect Effect Direct Effect

Bootstrapping Results .154 .081
Bootstrapping P-Value .001 .095
Result Significant Not Significant
Type of Mediation Full Mediation since direct effect is not significant

Based on the results in Table 16, the researcher can conclude that the result of bootstrapping is
consistent with mediation test result in Table 12.

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6.5 MEDIATION TEST: CONFIRMING THE RESULT THROUGH

BOOTSTRAPPING FOR MORE COMPLICATED MODEL

Figure 1: The Standardized Path Coefficient for every path in the model

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Figure 2: The Regression Path Coefficient for every path in the model

Note: KDS, KPS, KTP, KMF, OP1, and OP2 are six exogenous constructs while Job Stress is
a mediator and Job Satisfaction is an endogenous construct in the model.

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Table 1: The Regression Path Coefficient and also the Standardized Path Coefficient
between constructs in the model

Std
Construct Construct Estimate S.E. C.R. P Result
Estimate
Job_Stress <--- KTP -.066 -.176 .033 -2.016 0.044 Significant
Job_Stress <--- KDS -.073 -.239 .036 -1.990 0.047 Significant
Job_Stress <--- KPS -.099 -.180 .032 -3.078 0.002 Significant
Job_Satisfaction <--- KTP -.039 -.049 .059 -.655 0.513 Not Significant
Job_Satisfaction <--- KDS -.052 -.140 .066 -.780 0.436 Not Significant
Job_Satisfaction <--- KPS -.150 -.041 .060 -2.517 0.012 Significant
Job_Satisfaction <--- Job_Stress -2.237 -.868 .148 -15.159 0.000 Significant

PROCEDURE FOR TESTING A MEDIATOR

Table A: Testing STRESS as a Mediator in the relationship between KTP and SATISFACTION

Relationship Standardized (β) P-Value Result

KTP→STRESS (a) 0.176 0.044 Significant
STRESS→SAT (b) 0.868 0.000 Significant
KTP→SAT (c) 0.049 0.513 Not Significant
a*b 0.153 Full Mediation since direct effect
a*b > c Mediation occurs (c) is not significant

Based on the above test, the mediation test is supported and the type of mediation is Full
Mediation since the direct effect is not significant. However, the researcher needs to confirm
with the results of direct effect and indirect effect from Bootstrapping. The Bootstrapping
result is shown in Table A1.

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Table A1: The Bootstrapping Result Shows the Significance of Direct and Indirect Effect

Indirect Effect P-Value Direct Effect P-Value

Bootstrapping P-Value 0.050 0.495
Result Significant Not Significant
Type of Mediation Full Mediation since direct effect is not significant

The bootstrapping result also indicates the Full Mediation, and it is consistent with the normal
testing procedure.

Table B: Testing STRESS as a Mediator in the relationship between KDS and SATISFACTION

Relationship Standardized (β) P-Value Result

KDS→STRESS (a) 0.239 0.047 Significant
STRESS→SAT (b) 0.868 0.000 Significant
KDS→SAT (c) 0.140 0.436 Not Significant
a*b 0.207 Full Mediation since direct effect (c) is not
a*b > c Mediation occurs significant

Based on the above test, the mediation test is supported and the type of mediation is Full
Mediation since the direct effects is not significant. However, the researcher needs to confirm
with the results of direct effect and indirect effect from Bootstrapping. The Bootstrapping
result is shown in Table B1.

Table B1: The Bootstrapping Result Shows the Significance of Direct and Indirect Effect
Indirect Effect P-Value Direct Effect P-Value
Bootstrapping P-Value 0.050 0.495
Result Significant Not Significant
Type of Mediation Full Mediation since direct effect is not significant

The bootstrapping result indicates the Full Mediation, and it is consistent with the normal
testing procedure which indicates Full Mediation.

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Table C: Testing STRESS as a Mediator in the relationship between KPS and SATISFACTION

Relationship Standardized (β) P-Value Result

KPS→STRESS (a) 0.180 0.002 Significant
STRESS→SAT (b) 0.868 0.000 Significant
KPS→SAT (c) 0.041 0.012 Significant
a*b 0.156 Partial Mediation since the direct effect (c) is also
a*b > c Mediation occurs significant

Based on the above test, the mediation test is supported and the type of mediation is Partial
Mediation since the direct effect is also significant. However, the researcher needs to confirm
with the results of direct effect and indirect effect from Bootstrapping. The Bootstrapping
result is shown in Table C1.

Table C1: The Bootstrapping Result Shows the Significance of Direct and Indirect Effect
Indirect Effect P-Value Direct Effect P-Value
Bootstrapping P-Value 0.007 0.035
Result Significant Significant
Type of Mediation Partial Mediation since direct is also significant

The bootstrapping result indicates the Partial Mediation; this is consistent with the result
using normal testing procedure which also indicates Partial Mediation.

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6.6 CCOMPUTING THE EFFECT SIZE OF A MEDIATOR

Supposed we are working with the following model (Figure 1). In this model, supposed the
researcher is interested to carry out the following analysis:
1) To determine whether Job Attitude mediates the relationship between Skills & Training
and Career Advancement.
2) To measure the effect size for every single path in the model
3) To measure the mediated effect of the mediator in the model

The effect size of Skills and

Training on Job Attitude = 0.78

r2XMY= 0.67

The total effect size of Skills &

Training and Job Attitude on
Career Advancement = 0.67

Figure 1: The model containing all constructs namely Skill & Training (X), Job Attitude (M), and
Career Advancement (Y).

The coefficients and their probability values are summarized in Table A. As discussed earlier,
these values can be used to determine the significance of a mediator in the model.

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Table A: The Standardized Regression Weight and its probability value:

Construct Path Construct Estimate P-Value Results

Job Attitude <--- Skills & Training 0.88 0.001 Significant
Career Advancement <--- Job Attitude 0.61 0.001 Significant
Career Advancement <--- Skills & Training 0.22 0.064 Not Significant

From the results in Figure 1, the indirect effect is 0.537 (0.88 * 0.61) higher than the direct
effect of 0.22. Thus, we can conclude that the construct Job Attitude is a mediator in the
relationship between Skills & Training and Career Advancement. The type of mediation here is
full mediation since the direct effect is not significant.
Now, we focus on computing the two effect sizes (objective 2 and 3). The computation will be
based on figures obtained in Figure 1, Figure 2, and Figure 3.

The effect size of Skills and Training on

Career Advancement = 0.59

r2XY = 0.59

Figure 2: The model containing construct Skills and Training (X) and Career Advancement (Y)

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Table B: The Regression Weights when Skills & Training is a sole predictor

Estimate P-value Result

Attitude <--- Knowledge 0.770 0.001 Significant

The effect size of Job Attitude on

Career Advancement = 0.66

r2MY = 0.66

Figure 3: The model containing Job Attitude (M) and Career Advancement (Y)

THE EFFECT SIZES IN A MEDIATION MODEL

Effect size is the amount of variance explained in the mediation model contributed by every
single path. The researcher might also be interested to know the relative contribution of
individual paths in the mediation model, especially the effect of a mediator on the dependent
variable. The researcher could assess the effect size for every path in the model, and also the
mediated effect of the mediator variable itself. Specifically, the two effect sizes are:

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(1) The r2 Measures the effect size of individual path in the model (3 paths)

(2) The r2 Measures the size of mediated effect of a mediator in the model

The range of values of r2 and its relative effect size based on definition by Cohen (1988) is
given in Table C
Table C: The Cohen's (1988) benchmark range of effect sizes:

Range of R2 The Effect Size

Below 0.13 Small Range
Between 0.13-0.26 Medium Range
Above 0.26 Large Range

1) r2 measures for the individual path in the mediation model is defined as follows

i) r2XM represents the squared partial correlation between the X and M variables in
the model,
ii) r2XY denotes the squared partial correlation between X and Y variables in the
model,
iii) r2MY.X corresponds to the squared partial correlation between the M and Y
variables when the influence of variable X removed,
For the above example - the following measures are obtained:

i) The effect size of Skills & Training (X) on Job Attitude (M) is 0.78 (Figure 1)
ii) The effect size of Skills & Training (X) on Career Advancement (Y) is 0.59 (Figure 2)
iii) The effect size of Job Attitude (M) on Career Advancement (Y), controlling for Skills
& Training. This is equivalent to r2XMY - r2XY = 0.67 – 0.59 = 0.08
(Note: r2XMY=0.67 - Figure 1)
Conclusion: The effect size of a mediator on DV is in small range

2) R2 Measures for the mediated effect of the mediator (Job Attitude).

This value is computed using the following formula:

r2MY – (r2XMY - r2XY), Where:

r2XY is the R2 for the model containing X and Y only (Figure 2)

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r2MY is the R2 for the model containing M and Y only (Figure 3)

r2 XMY is the R2 for the model containing all X, M, and Y (Figure 1)
r2MY – (r2XMY - r2XY)

0.66 – (0.67-0.59) = 0.58

Thus, based on Cohen (1988), the mediated effect size of the mediator (Job Attitude) in
the relationship between Skills & Training and Career Advancement is large.

In Class Exercises:

a) Refer to the model in Figure 10 above. Obtain the following values:

1) The effect size of Service Quality on Customer Satisfaction

2) The effect size of Service Quality on Customer Loyalty
3) The effect size of Customer Satisfaction on Customer Loyalty
4) The mediated effect of Customer Satisfaction in the model linking Service Quality to
Customer Loyalty

b) Refer to the model in Figure 10 above. Obtain the following values:

1) The effect size of Corporate Image on Customer Satisfaction

2) The effect size of Corporate Image on Customer Loyalty
3) The effect size of Customer Satisfaction on Customer Loyalty
4) The mediated effect of Customer Satisfaction in the model linking Corporate image to
Customer Loyalty

Power in the Mediation Models

The power to detect the significance of mediation effects is always lower than the power to
detect the significance of the main effects because the magnitude of the mediated effect is
bounded by the individual coefficients from which it is formed. Recent research has shown that
causal steps tests for mediation and normal theory point estimators of the mediated effect are
underpowered (MacKinnon et al., 2002).

Methodological work has shown that asymmetric confidence limits based on the distribution of
the product and re-sampling methods such as the percentile bootstrap and the bias-corrected

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bootstrap give the best combination of low Type 1 error rates and power to detect effects in
mediation models (MacKinnon et al., 2002). Consequently, these methods should be
implemented to test mediation hypotheses in substantive research.

6.7 TTESTING THE MEDIATION EFFECTS IN A COMPLEX MODEL

In some studies the structural model consists of many mediator constructs, and it is very
challenging to test the hypothesis for mediation effects in this model. The example in Figure 1
consists of five latent constructs (three second order and two first order constructs).

Figure 1: The Standardized Path Coefficients for the model

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Table 1: The Regression Path Coefficient and its significance

Construct Construct Estimate S.E. C.R. P Results

Service Determinant
<--- Consumer Value .678 .084 8.108 *** Significant
Logic
Service Determinant Not
<--- Service Innovation .052 .045 1.136 .256
Logic Significant
Service Innovation Service Determinant
<--- .823 .094 8.741 *** Significant
Performance Logic
Service Innovation Not
<--- Consumer Value .027 .078 .352 .725
Performance Significant
Service Innovation
Business Performance <--- .711 .076 9.409 *** Significant
Performance
Service Determinant Not
Business Performance <--- .146 .076 1.924 .054
Logic Significant
Not
Business Performance <--- Service Innovation .040 .030 1.337 .181
Significant
Not
Business Performance <--- Consumer Value -.002 .059 -.027 .979
Significant

Exercise to enhance the knowledge in testing the mediator:

Using the output in Figure 1 and the results in Table 1, test the hypothesis for all mediation
effects in the model.

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