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AN INTRODUCTION TO
PARTIAL LEAST SQUARES
PATH MODELING
Giorgio Russolillo
CNAM, Paris
giorgio.russolillo@cnam.fr
Karl Jöreskog
is Professor at Uppsala University, Sweden
In the second half of the 60s, he started collaborating with O.D. Duncan
and A. Goldberger. This collaboration represents a meeting between Factor
Analysis (and the concept of latent variable) and Path Analysis (i.e. the idea
behind causal models).
In factor- based SEMs the latent variables are equivalent to common factors
à they are theoretical (and random) variables
or Unidirectional Path
(cause-effect)
or Bidirectional Path
(correlation)
Feedback relation or
reciprocal causation
ε or ε or ε Errors
Path
ε11 x11 Coefficients
x13 ε13
ε21 x21 ξ1 β1
x23 ε23
ε31 x31
ξ3 x33 ε33
β23
ξ2
where:
- Βjq* is the path-coefficient linking the j-th LV to the q*-th endogenous LV
- J is the number of the explanatory LVs impacting on ξq*
x pq = λ pqξ q + ε pq
where:
- lpq is a loading term linking the q-th LV to the p-th MV
ξq =Xqwq
ξˆq ∝ X q w q
tq = Xqwq
Mode A (for outwards directed links – reflective – principal factor model):
wpq =(1/n) xpqTzq
è These indicators should covary Latent Construct
è Several simple OLS regressions
è Explained Variance (higher AVE, communality)
è Internal Consistency
è Stability of results with well-defined blocks x1q x2q x3q x4q
t1
t q ∝ Xqwq
Outer
Update weights eqq’:
estimation - Centroid: correlation signs
Initial wq - Factorial: correlations
step - Path weighting scheme: multiple
regression coefficients or correlations
Reiterate till
Numerical
Convergence
tq1 eq1
Mode B: wq = (Xq´Xq)-1Xq´zq
tqq eqq
⎧ ⎫
wq
⎪⎩ q≠q'
( (
max ⎨∑ cqq' g cov X q w q ,X q'w q' )) ⎬
⎪⎭ 2
s.t. X q w q = n
where:
!1 if X q and X q ' is connected !# square (Factorial scheme)
cqq ' = " g="
#0 otherwise #$ abolute value (Centroid scheme)
⎧⎪ ⎫⎪
wq
⎪⎩ q≠q'
( (
max ⎨ ∑ cqq' g cov X q w q , X q' w q' )) ⎬ s.t. w q
⎪⎭
2
=n
A general criterion for PLS-PM, in which (New) Mode A and B are mixed, can
be written as follows:
⎧ ⎫
wq
⎪⎩ q≠q'
( (
max ⎨∑ cqq' g cov X q w q ,X q'w q' )) ⎬=
⎪⎭
⎧ ⎤⎫
(
max ⎨∑ cqq' g ⎡⎢ cor X q w q ,X q'w q'
⎪⎩ q≠q' ⎣
) (
var X q w q ) (
var X q'w q' ) ⎥⎦ ⎬⎪
⎭
wq
2
s.t. X q w q = n if Mode B for block q
2
wq = n if New Mode A for block q
Component
1
XL-STAT graphical results
VVLT1
.648
VVLT2
.729
VVLT3
.823
VVLT4
.830
Extraction Method: Principal Component Analysis.
a. 1 components extracted.
Component Matrixa
Component
1
VCPT1
.869
VCPT2
.919
VCPT3
.938
VCPT4
.920
Principal Component Analysis.
a. 1 components extracted.
* Results from W.W. Chin slides on PLS-PM
Redundancy Analysis X1 X2
(1st component)
ξ1 ξ2
arg max
var( X1w1 )= w 2 =1
{cov( X w ,X w )}
1 1 2 2
Mode B for X1, Mode A for X2
X1 ξ1 X1
.
.
.
ξ .
.
X
.
XK ξK XK
{∑ cor ( X w ,Xw )}
Mode B + Factorial
- Generalised Canonical Correlation Analysis (Carroll) arg max k k
var( X k w k )=1,Xw= ∑ X k w k
k
k
Mode B + Centroid
- Generalised CCA (Horst’s SUMCOR criterion)
- Mathes (1993) & Hanafi (2004)
arg max
var( X k w k )=1,Xw= ∑ X k w k
{∑ cor (X w , Xw)}
k
2
k k
k
.
X
. 2 ξ1 ξ3 X3
.
.
X
. 2 ξ2 ξ4 X4
.
rel ( x ) =
(
λ pq)var ξ q 2
pq
var ( x )
= cor ( x pq
,ξ q )
pq
Question:
How to measure the overall reliability of the measurement tool ?
In other words, how to measure the homogeneity level of a block Xq of
positively correlated variables?
Answer:
The composite reliability (internal consistency) of manifest variables
can be checked using:
• the Cronbach’s Alpha
• the Dillon Goldstein rho
( ) ( ∑ λ ) × var (ξ )
2
αq =
Pq ∑ p≠ p'
cov x pq , x p'q p pq q
ρq =
( P − 1) P + ∑
q q p≠ p' (
cov x pq , x p'q ) (∑ λ ) × var (ξ ) + ∑ var (ε )
p pq
2
q p pq
Where:
- xpq is the p-th manifest variable in the block q,
- Pq is the number of manifest variables in the block,
- λpq is the component loading for xpq
- var(εpq) is the variance of the measurement error
- MVs are standardized
Cronbach’s alpha assumes lambda-equivalence (parallelity) and is a lower bound estimate
of reliability
The manifest variables are reliable if these indices are at least 0.7
(0.6 to 0.8 according to exploratory vs. confirmatory purpose)
An introduction to Partial Least Squares Path Modeling G. Russolillo – slide 35
What if unidimensionality is rejected?
Four possible solutions:
X1 x1 X1
.
. x .
.
X
. .
XK xK XK
AVEq =
∑
p ⎣ pq ( )
⎡ λ 2 var ξ ⎤
q ⎦
( ) (
∑ p ⎡⎣ λ pq2 var ξq ⎤⎦ + ∑ q 1− λ pq2 )
(
H 0 : cor ξq , ξq' = 1 ) ( )
H 0 : cor ξq , ξq' = 0
The correlation between two latent variables is tested to be significantly lower than 1
(discriminant validity) and significantly higher than 0 (nomological validity):
Decision Rules:
The null hypotheses are rejected if:
1. 95% confidence interval for the mentioned correlation does not comprise 1 and 0,
respectively (bootstrap/jackknife empirical confidence intervals);
2 ˆ ˆ
(
2. For discriminant validty only: (AVEq and AVEq’) > cor ξ q , ξ q' ) which indicates
that more variance is shared between the LV and its block of indicators than with
another LV representing a different block of indicators.
An introduction to Partial Least Squares Path Modeling G. Russolillo – slide 39
Model Assessement
Since PLS-PM is a Soft Modeling approach, model validation regards only the way
relations are modeled, in both the structural and the measurement model; in particular,
the following null hypotheses should be rejected:
a) λpq = 0, as each MV is supposed to be correlated to its corresponding LV;
b) wpq = 0, as each LV is supposed to be affected by all the MVs of its block;
c) βqq’ = 0, as each latent predictor is assumed to be explanatory with respect to its
latent response;
d) R2q* = 0, as each endogenous LV is assumed to be explained by its latent predictors;
e) cor(ξq; ξq’) = 0, as LVs are assumed to be connected by a statistically significant
correlation. Rejecting this hypothesis means assessing the Nomological Validity of
the PLS Path Model;
f) cor(ξq; ξq’) = 1, as LVs are assumed to measure concepts that are different from one
another. Rejecting this hypothesis means assessing the Discriminant Validity of the
PLS Path Model;
g) Both AVEq and AVEq’ smaller than cor2(ξq; ξq’), as a LV should be related more
strongly with its block of indicators than with another LV representing a different
block of indicators.
An introduction to Partial Least Squares Path Modeling G. Russolillo – slide 40
Model Fit
x3q
(NB: if standardised MVs: Comq = AVEq)
x2 x6
ξ1
x7
Var ⎡⎣ β qq*ξ q ⎤⎦
x3
ξ3 x8
REDx = λ 2
x4
Var ⎡⎣ x pq* ⎤⎦
pq* pq* x9
x10
ξ2
x5
( )
Redundancy q* = R 2 ξ q* ,ξ q: ξq → ξq * × Communality q*
∑ ∑ (x pqi
-x pq
-λ̂ ˆ )2
ξ
pq(-i ) q(-i ) ∑∑(x pqi
-x pq -λ̂ pq(-i) Pred(ξˆq(-i) )) 2
H q2 = 1− q i Fq2 = 1− q i
∑ ∑ (x pqi
-x pq ) 2 ∑ ∑ (x
q i
pqi
-x pq ) 2
q i
The mean of the CV-communality and the CV-redundancy (for endogenous blocks) indices can be
used to measure the global quality of the measurement model if they are positive for all blocks
(endogenous for redundancy).
X
X
From W.W. Chin’s slides on PLS-PM
5 7 8
9 10 12
13 14 15
• PLS-PM does not optimize one single criterion, instead it is very flexible as
it can optimize several criteria according to the user’s choices for the
estimation modes, schemes and normalization constraints.
• Users and researchers often feel uncomfortable especially as compared to
the traditional covariance-based SEM.
• Features of a global index:
– compromise between outer and inner model performance;
– bounded between a maximum and a maximum
Pq
∑ ∑ Cor ( x ξq ) × ( )
1 1 Q* 2
* ∑
GoF = 2
pq, R ξq*, ξ j explaining ξq*
Q q*=1
∑P
q:Pq >1
q
q:Pq >1 p=1
Validation of Validation of
the outer model the inner model
Image
CUSA1 CUSA2
Expectation PERV1 Loyalty
Perceived Satisfaction
Value
PERQ1
CUSA3
PERQ2
Perceived PERV2
Quality Complaints
PERQ3
Customer expectation
1. Expectations for the overall quality Customer satisfaction
of “your mobile phone provider” at
the moment you became customer of 1. Overall satisfaction
this provider.
2. Fulfilment of expectations
2. Expectations for “your mobile phone
provider” to provide products and 3. How well do you think “your
services to meet your personal need. mobile phone provider”
compares with your ideal
3. How often did you expect that things mobile phone provider ?
could go wrong at “your mobile
phone provider” ?
Customer loyalty
1. If you would need to choose a new mobile phone provider how
likely is it that you would choose “your provider” again ?
2. Let us now suppose that other mobile phone providers decide to
lower fees and prices, but “your mobile phone provider” stays at
the same level as today. At which level of difference (in %) would
you choose another phone provider ?
3. If a friend or colleague asks you for advice, how likely is it that
you would recommend “your mobile phone provider” ?