Improper use of formative endogenous variables

John W. Cadogan, Nick Lee

Research output: Contribution to journalArticlepeer-review


Researchers often develop and test conceptual models containing formative variables. In many cases, these formative variables are specified as being endogenous. This article provides a clarification of formative variable theory, distinguishing between the formative latent variable and the formative composite variable. When an endogenous latent variable relies on formative indicators for measurement, empirical studies can say nothing about the relationship between exogenous variables and the endogenous formative latent variable: conclusions can only be drawn regarding the exogenous variables' relationships with a composite variable. The authors also show the dangers associated with developing theory about antecedents to endogenous formative variables at the (aggregate) formative latent variable level. Modeling relationships with endogenous formative variables at the (disaggregate) indicator level informs richer theory development, and encourages more precise empirical testing. When antecedents' relationships with endogenous formative variables are modeled at the formative latent variable level rather than the formative indicator level, theory construction can verge on the superficial, and empirical findings can be ambiguous in substantive meaning.
Original languageEnglish
Pages (from-to)233-241
Number of pages9
JournalJournal of Business Research
Issue number2
Early online date23 Aug 2012
Publication statusPublished - Feb 2013


  • conceptual models
  • formative latent variables
  • composite variables
  • measurement
  • theory development
  • partial least squares


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