Business Research Methods

William G. Zikmund

Chapter 3: Theory Building

 Theory

• A theory consists of a coherent set of general

propositions that offer an explanation of some
phenomena by describing the way other things
correspond to these phenomena.
• A theory is a formal, testable explanation of some
events that include explanations of how things
relate to one another.
 Two Purposes of Theory

• Prediction (forecast)
• Understanding
 Understanding and Prediction (forecast)

The first goal allows the theorist to gain an understanding of

the relationship among various phenomena.
For example, a financial advisor may believe, or theorize,
that older investors tend to be more interested in
investment income than younger investors. This theory, once
verified, would then allow her to predict the importance of
expected dividend yield based on the age of her customer.
Thus a theory enables us to predict the behavior or
characteristics of one phenomenon from the knowledge of
another phenomenon.
 Theory
• A theory can be built through a process of reviewing
previous findings of similar studies, simple logical
deduction (conclusion), and/or knowledge of applicable
theoretical areas.
• For example, if a Web designer is trying to decide what
colour background is most effective in increasing online
sales, he may first consult previous studies examining the
effects of colour on package design and retail store
design. He may also find theories that deal with the
wavelength of different colors, affective response to
colors, or those that explain retail atmospherics. This may
lead to the specific prediction that blue is the most
effective background color for a Web site.
 Concept (or Construct)

• A concept or construct is a generalized idea about a class of

objects that has been given a name; an abstraction of reality
that is the basic unit for theory development.
• Concepts are the building blocks of theory.
• In organizational theory, leadership, productivity, and morale are
concepts.
• In the theory of finance, gross national product, risk, and inflation are
frequently used concepts.
• Accounting concepts include assets, liabilities, and depreciation.
• In marketing, customer satisfaction, market share, and loyalty are
important concepts.
 Ladder of abstraction (thought)

• Concepts abstract reality. That is, concepts express in

words various events or objects. Concepts, however, may
vary in degree of abstraction.
• For example, the concept of an asset is an abstract term
that may, in the concrete world of reality, refer to a wide
variety of things, including a specific punch press
machine in a production shop.
• Moving up the ladder of abstraction, the basic concept becomes
more general, wider in scope, and less amenable to measurement.
The abstraction ladder in Exhibit 3.1 indicates that it is
possible to discuss concepts at various levels of
abstraction.
 Scientific Business Researchers Operate at
Two Levels
 Abstract level - In theory development, the level of
knowledge expressing a concept that exists only as an idea or
a quality apart from an object.
– concepts
– Propositions
 Empirical level- Level of knowledge reflecting that which
is verifiable by experience or observation.
– variables
– hypotheses
Job performance as shown in Exhibit
3.2. I
• Propositions are statements concerned with the
relationships among concepts. A proposition explains the
logical linkage among certain concepts by asserting a
universal connection between concepts.
• For example, we might propose that treating our employees
better will make them more loyal employees. This is
certainly a logical link between managerial actions and
employee reactions, but is quite general and not really
testable in its current form.
Research Propositions and Hypotheses

A hypothesis is a formal statement explaining some

outcome. In its simplest form, a hypothesis is a guess.
A sales manager may hypothesize that the salespeople who
are highest in product knowledge will be the most productive.
An advertising manager may hypothesize that if consumers’
attitudes toward a product change in a positive direction,
there will be an increase in consumption of the product.
A human resource manager may hypothesize that job
candidates with certain majors will be more successful
employees.
Theory Building a Process of Increasing
Abstraction

Increasingly more abstract

Theories

Propositions

Concepts

Observation of objects
and events (reality )
• A hypothesis is an empirically testable
proposition. It is an empirical statement
concerned with the relationship among
variables.
• A variable is anything that may assume different
numerical values.
 Proposition at Abstract Level

Concept A Concept B
(Reinforcement) (Habits)

The hypothesis at Empirical Level

Dollar bonus for Always makes

sales volume four sales calls
over quota a day
 Deductive Reasoning

• The logical process of deriving a conclusion from a known

premise or something known to be true.
– We know that all managers are human beings.
– If we also know that John Smith is a manager,
– then we can deduce that John Smith is a human being.
Deductive reasoning in business research

• Deductive reasoning in business research refers to a

logical approach where a researcher starts with a general
theory or hypothesis and then collects data to test and
confirm or refute that theory, essentially moving from
broad concepts to specific conclusions to validate existing
knowledge within a business context; it's often used in
quantitative research methods to test hypotheses through
data analysis.
 Key points about deductive reasoning
in business research:
• Starts with a theory: Unlike inductive reasoning, which aims to
develop new theories from observations, deductive research
begins with an existing theory or established knowledge about
a business phenomenon.
• Hypothesis testing: The core process involves formulating
specific hypotheses based on the theory and then designing
research methods to collect data that can either support or
reject those hypotheses.
• Quantitative methods: Deductive reasoning is commonly
associated with quantitative research methods like surveys,
experiments, and statistical analysis, as they allow for precise
data collection to test hypotheses rigorously.
 Inductive Reasoning

• The logical process of establishing a general proposition

based on observation of particular facts.
– All managers that have ever been seen are human
beings; therefore, all managers are human beings.
 Inductive Reasoning in Business Research

Inductive reasoning in business research refers to a method

where researchers start with specific observations or data
points and then use them to develop broader theories or
generalizations, essentially building a conclusion from the
bottom up by analyzing patterns within the collected data;
it's a common approach for exploratory research where the
goal is to discover new insights and trends rather than
testing pre-existing hypotheses.
 Key points about inductive reasoning in
business research:

• Bottom-up approach: Unlike deductive reasoning, which

starts with a theory and tests it with data, inductive
reasoning begins with data collection and then forms a
theory based on the observed patterns.
• Data collection methods: Often involves qualitative
research methods like interviews, focus groups, or case
studies to gather rich, detailed information.
 Key points about inductive reasoning in
business research:

• Identifying trends and patterns: Researchers analyze the

collected data to identify recurring themes, similarities,
and significant relationships between variables.
• Theory development: Based on the observed patterns,
researchers develop new theories or hypotheses that can
be further tested in future research
 The Scientific Method
• The scientific method is a set of prescribed procedures for
establishing and connecting theoretical statements about
events, for analyzing empirical evidence, and for
predicting events yet unknown. It is useful to look at the
analytic process of scientific theory building as a series of
stages. While there is not complete consensus concerning
exact procedures for the scientific method, we suggest
seven operations may be viewed as the steps involved in
the application of the scientific method.
 The Scientific Method: An Overview

Assess Formulate Statement

Design
relevant concepts & of
research
existing Propositions Hypotheses
knowledge

Acquire Analyze & Provide

empirical evaluate explanation-
data data state new
problem
 Business
Research Methods

William G. Zikmund

Chapter 6:
Problem Definition and the
Research Proposal
 The Problem-Definition Process

• A problem occurs when there is a

difference between the current conditions
and a more preferable set of conditions. In
other words, a gap exists between the way
things are now and a way that things could
be better.
 The gap can come about in a number
of ways:
1. Business performance is worse than expected business
performance. For instance, sales, profits, and margins could
be below targets set by management. This is a very typical
type of problem analysis. Think of all the new products that
fail to meet their targeted goals.
2. Actual business performance is less than possible
business performance. Realization of this gap first requires
that management have some idea of what is possible. This
may form a research problem in and of itself.
 The gap can come about in a number
of ways:
3. Expected business performance is greater than possible
business performance. Sometimes, management has
unrealistic views of possible performance levels—either too
high or too low. One key problem with new product
introductions involves identifying realistic possibilities for
sales. While you may have heard the old adage that 90
percent of all new products fail, how many of the failures had
a realistic sales ceiling?
The Problem-Definition Process Steps

The problem-definition process involves several interrelated

steps, as shown in Exhibit 6.2. Sometimes, the boundaries
between each step aren’t exactly clear. But generally,
completing one step leads to the other and by the time the
problem is defined, each of these steps has been addressed in
some way.
The Problem-Definition Process Steps

The steps are

•1. Understand the business situation—identify key
symptoms
•2. Identify key problem(s) from symptoms
•3. Write managerial decision statement and corresponding
research objectives
•4. Determine the unit of analysis
•5. Determine the relevant variables
•6. Write research questions and/or research hypotheses
The Problem-Definition Process Steps

1. Understand the business situation—identify key

symptoms- A situation analysis involves the gathering of
background information to familiarize researchers and
managers with the decision-making environment. The
situation analysis can be written up as a way of documenting
the problem-definition process. Gaining an awareness of
marketplace conditions and an appreciation of the situation
often requires exploratory research. Researchers sometimes
apply qualitative research with the objective of better
problem definition. The situation analysis begins with an
interview between the researcher and management.
The Problem-Definition Process Steps

• INTERVIEW PROCESS- The researcher must enter a

dialogue with the key decision makers in an effort to fully
understand the situation that has motivated a research
effort. This process is critical and the researcher should be
granted access to all individuals who have specific
knowledge of or insight into this situation.
The Problem-Definition Process Steps

There are many ways to discover problems and spot

opportunities. Some helpful hints that can be useful
in the interview process include:
1. Develop many alternative problem statements.
These can emerge from the interview material or
from simply rephrasing decision statements and
problem statements.
The Problem-Definition Process Steps

2. Think about potential solutions to the problem.

Ultimately, for the research to be actionable, some plausible
solution must exist. After pairing decision statements with
research objectives, think about the solutions that might
result. This can help make sure any research that results is
useful.
3. Make lists. Use free-association techniques to generate
lists of ideas. The more ideas, the better. Use interrogative
techniques to generate lists of potential questions that can be
used in the interview process. assist with problem definition.
The Problem-Definition Process Steps

Interrogative techniques simply involve asking multiple

what, where, who, when, why, and how questions. They can
also be used to provoke introspection, which can assist with
problem definition.
4. Be open-minded. It is very important to consider all ideas
as plausible in the beginning stages of problem solving. One
sure way to stifle progress is to think only like those
intimately involved in the business situation or only like
those in other industries. Analogies can be useful in thinking
more creatively.
The Problem-Definition Process Steps

The steps are

•1. Understand the business situation—identify key
symptoms
•2. Identify key problem(s) from symptoms
•3. Write managerial decision statement and corresponding
research objectives
•4. Determine the unit of analysis
•5. Determine the relevant variables
•6. Write research questions and/or research hypotheses
The Problem-Definition Process Steps

2. Identify key problem(s) from symptoms: Interviews with

key decision makers also can be one of the best ways to
identify key problem symptoms. Recall that all problems
have symptoms just as human disease is diagnosed through
symptoms. Once symptoms are identified, then the researcher
must probe to identify possible causes of these changes.
Probing is an interview technique that tries to draw deeper
and more elaborate explanations from the discussion. One of
the most important questions the researcher can ask during
these interviews is, “what has changed?” Then, the researcher
should probe to identify potential causes of the change.
The Problem-Definition Process Steps

2. Identify key problem(s) from symptoms (cont…)

Almost any situation can be framed from a number of
different perspectives. A pricing problem may be rephrased
as a brand image problem. People expect high quality
products to have higher prices. A quality problem may be
rephrased as a packaging problem.
For example, a potato chip company thought that a quality
differential between their potatoes and their competitor’s was the
cause for the symptom showing sliding market share. However,
one of the research questions that eventually resulted dealt with
consumer preferences for packaging. In the end, research suggested
that consumers prefer a foil package because it helps the chips stay
fresher longer. Thus, the key gap turned out to be a package gap!
The Problem-Definition Process Steps

2.1. Identifying the Relevant Issues from the Symptoms-

Anticipating the many influences and dimensions of a
problem is impossible for any researcher or executive.
However, the researcher needs to be doubly certain that the
research attacks real problems and not superficial symptoms.
For instance, when a firm has a problem with advertising
effectiveness, the possible causes of this problem may be
low brand awareness, the wrong brand image, use of the
wrong media, or perhaps too small a budget. Certain
occurrences that appear to be the problem may be only
symptoms of a deeper problem.
Exhibit 6.4 illustrates how symptoms can be translated into a problem and then a
decision statement.
The Problem-Definition Process Steps

3. Write managerial decision statement and

corresponding research objectives- Decision statements
must be translated into research objectives. At this point, the
researcher is starting to visualize what will need to be
measured and what type of study will be needed. Each
research objective states a corresponding potential result(s) of
the research project. Thus, in some ways, it is stating the
information that is needed to help make the decision. Once
the decision statement is written, the research essentially
answers the question, “What information is needed to address
this situation?”
 EXHIBIT 6.5 Translating Decision Statements

Decision Research Research Research

Statement Objectives Questions Hypotheses

Express in Expresses Ask a question Specific statement

actionable terms potential that Explaining relationships,
and make sure research results corresponds to usually involving two
decision makers that should aid each research variables, and including
are in agreement decision-making objective the direction of the
relationship
What things can be Determine How do the type of Child-friendly pool
done to energize reasons facilities and designs are positively
new why families pricing related to attitudes
relate to family
markets and create may toward the facility.
attitudes toward a
a more favorable choose to join or swim facility?
attitude not Child
Toward the join a “swim
association? club.”
The Problem-Definition Process Steps

4. Determine the unit of analysis- The unit of

analysis for a study indicates what or who should
provide the data and at what level of aggregation.
Researchers specify whether an investigation will
collect data about individuals (such as customers,
employees, and owners), households (families,
extended families, and so forth), organizations
(businesses and business units), departments (sales,
finance, and so forth), geographical areas, or objects
(products, advertisements, and so forth).
The Problem-Definition Process Steps

5. Determine the relevant variables-

What things should be studied to address a decision
statement? Researchers answer this question by identifying
key variables.
A variable is anything that varies or changes from one
instance to another. Variables can exhibit differences in
value, usually in magnitude or strength, or in direction. In
research, a variable is either observed or manipulated, in
which case it is an experimental variable.
Constant. A constant is something that does not change.
Constants are not useful in addressing research questions..
The Problem-Definition Process Steps

TYPES OF VARIABLES-
A continuous variable is one that can take on a range of
values that correspond to some quantitative amount.
Consumer attitude toward different airlines is a variable that
would generally be captured by numbers, with higher
numbers indicating a more positive attitude than lower
numbers.
Each attribute of airlines’ services, such as safety, seat
comfort, and baggage handling can be numerically scored in
this way.
Sales volume, profits, and margin are common business
metrics that represent continuous variables
The Problem-Definition Process Steps

A categorical variable is one that indicates membership in

some group. The term classificatory variable is sometimes
also used and is generally interchangeable with categorical
variable. Categorical variables sometimes represent
quantities that take on only a small number of values (one,
two, or three). However, categorical variables more often
simply identify membership.
For example, people can be categorized as either male or
female. A variable representing biological sex describes
this important difference.
The Problem-Definition Process Steps
• In descriptive and causal research, the terms dependent variable and
independent variable describe different variable types. A dependent
variable is a process outcome or a variable that is predicted and/or
explained by other variables. An independent variable is a variable
that is expected to influence the dependent variable in some way.
For example, average customer loyalty may be a dependent
variable that is influenced or predicted by an independent
variable such as perceptions of restaurant food quality, service
quality, and customer satisfaction. Thus, a process is described
by which several variables together help create and explain how
much customer loyalty exists. In other words, if we know how a
customer rates the food quality, service quality, and satisfaction
with a restaurant, then we can predict that customer’s loyalty
toward that restaurant.
The Problem-Definition Process Steps

Dependent variables are conventionally represented by the

letter Y. Independent variables are conventionally
represented by the letter X. If research involves two
dependent variables and two or more independent variables,
subscripts may also be used to indicate Y1, Y2 and X1, X2,
and so on
The Problem-Definition Process Steps

5. Determine the relevant variables- The process of

identifying the relevant variables overlaps with the process of
determining the research objectives. Typically, each research
objective will mention a variable or variables to be measured
or analyzed. As the translation process proceeds through
research objectives, research questions, and research
hypotheses, it is usually possible to emphasize the variables
that should be included in a study (as in Exhibits 6.5 and
6.6).Exhibit 6.6 includes some common business research
hypotheses and a description of the key variables involved in
each.
The Problem-Definition Process Steps

6. Write research questions and/or research hypotheses-

Both managers and researchers expect problem-definition
efforts to result in statements of research questions and
research objectives. At the end of the problem-definition
stage, the researcher should prepare a written statement that
clarifies any ambiguity about what the research hopes to
accomplish. This completes the translation process. Research
questions express the research objectives in terms of
questions that can be addressed by research.
The Problem-Definition Process Steps

6. Write research questions and/or research hypotheses

(cont….)
Hypotheses are more specific than research questions. One
key distinction between research questions and hypotheses is
that hypotheses can generally specify the direction of a
relationship. In other words, when an independent variable
goes up, we have sufficient knowledge to predict that the
dependent variable should also go up (or down as the case
may be).
The Problem-Definition Process Steps

6. Write research questions and/or research hypotheses

(cont….) One key research hypothesis for Deland Trucking
is:
Higher cents per mile are related positively to driver loyalty.
At times, a researcher may suspect that two variables are related
but have insufficient theoretical rationale to support the
relationship as positive or negative. In this case, hypotheses cannot
be offered. At times in research, particularly in exploratory
research, a proposal can only offer research questions. Research
hypotheses are much more specific and therefore require
considerably more theoretical support. In addition, research
questions are interrogative, whereas research hypotheses are
declarative.
 Clarity in Research Questions and
Hypotheses
• A formal hypothesis has considerable practical
value in planning and designing research. It forces
researchers to be clear about what they expect to
find through the study, and it raises crucial
questions about data required. When evaluating a
hypothesis, researchers should ensure that the
information collected will be useful in decision
making.
 Summary
The problem definition process in business
research
• Identify the Research Problem: Clearly articulate the
issue or opportunity that needs investigation.
• Review Existing Literature: Examine previous research
related to the problem to understand the context and
identify gaps.
• Define Objectives: Establish specific goals for the
research, detailing what you aim to achieve.
 Summary
The problem definition process in business
research
• Develop a Research Question: Formulate a clear and
focused question that the research will address.
• Determine the Scope: Specify the boundaries of the
research, including what will and won’t be covered.
• Select Research Methodology: Choose appropriate
methods for data collection and analysis based on the
objectives.
 Summary
The problem definition process in business
research
• Validate the Problem Definition: Discuss the problem
definition with stakeholders to ensure it aligns with their
understanding and expectations.
• Document the Problem Definition: Create a formal
document summarizing the problem, objectives, and
research questions.
 Clarity in Research Questions and
Hypotheses
Notice how the following hypotheses express
expected relationships between variables:
•There is a positive relationship between buying on
the Internet and the presence of younger children in
the home.
•Sales are lower for salespeople in regions that
receive less advertising support.
 The Research Proposal

• The research proposal is a written statement of the

research design. It always includes a statement explaining
the purpose of the study (in the form of research objectives
or deliverables) and a definition of the problem, often in
the form of a decision statement. A good proposal
systematically outlines the particular research
methodology and details procedures that will be used
during each stage of the research process. Normally a
schedule of costs and deadlines is included in the research
proposal.
 EXHIBIT 6.9
Basic Points Addressed by Research Proposals

• Problem definition
• What is the purpose of the study?
• How much is already known?
• Is additional background information necessary?
• What is to be measured? How?
• Can the data be made available?
• Should research be conducted?
• Can a hypothesis be formulated?
 EXHIBIT 6.9
Basic Points Addressed by Research Proposals

• Selection of basic research design

• What types of questions need to be answered?
• Are descriptive or causal findings required?
• What is the source of the data?
• Can objective answers be obtained by asking people?
• How quickly is the information needed?
• How should survey questions be worded?
• How should experimental manipulations be made?
 EXHIBIT 6.9
Basic Points Addressed by Research Proposals

• Selection of sample
• Who or what is the source of the data?
• Can the target population be identified?
• Is a sample necessary?
• How accurate must the sample be?
• Is a probability sample necessary?
• Is a national sample necessary?
• How large a sample is necessary?
• How will the sample be selected?
 EXHIBIT 6.9
Basic Points Addressed by Research Proposals

• Data gathering
• Who will gather the data?
• How long will data gathering take?
• How much supervision is needed?
• What procedures will data collectors need to follow
 EXHIBIT 6.9
Basic Points Addressed by Research Proposals

• Data analysis and evaluation

• Will standardized editing and coding procedures be used?
• How will the data be categorized?
• Will computer or hand tabulation be used?
• What is the nature of the data?
• What questions need to be answered?
• How many variables are to be investigated
simultaneously?
• What are the criteria for evaluation of performance?
• What statistical tools are appropriate?
 EXHIBIT 6.9
Basic Points Addressed by Research Proposals

• Type of report

• Who will read the report?

• Are managerial recommendations requested?
• How many presentations are required?
• What will be the format of the written report?
 EXHIBIT 6.9
Basic Points Addressed by Research Proposals

• Overall evaluation
• How much will the study cost?
• Is the time frame acceptable?
• Is outside help needed?
• Will this research design attain the stated research
objectives?
• When should the research begin