Professional Documents
Culture Documents
Chapter 3
Exploratory Factor Analysis
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Factors
Waiting Time
Cleanliness
Service Quality
Friendly Employees
Taste
Temperature
Food Quality
Freshness
Copyright 2010 Pearson Education, Inc., publishing as Prentice-Hall.
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Rules of Thumb 31
Factor Analysis Design
o Factor analysis is performed most often only on metric
variables, although specialized methods exist for the use of
dummy variables. A small number of dummy variables can
be included in a set of metric variables that are factor
analyzed.
o If a study is being designed to reveal factor structure, strive
to have at least five variables for each proposed factor.
o For sample size:
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Assumptions
Multicollinearity
Assessed using MSA (measure of sampling
adequacy).
The MSA is measured by the Kaiser-Meyer-Olkin (KMO)
statistic. As a measure of sampling adequacy, the KMO predicts if
data are likely to factor well based on correlation and partial
correlation. KMO can be used to identify which variables to drop
from the factor analysis because they lack multicollinearity.
There is a KMO statistic for each individual variable, and their
sum is the KMO overall statistic. KMO varies from 0 to 1.0.
Overall KMO should be .50 or higher to proceed with factor
analysis. If it is not, remove the variable with the lowest individual
KMO statistic value one at a time until KMO overall rises above .
50, and each individual variable KMO is above .50.
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Rules of Thumb 32
Testing Assumptions of Factor Analysis
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Extraction Decisions
o Which method?
Principal Components Analysis
Common Factor Analysis
o How to rotate?
Orthogonal or Oblique rotation
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Diagonal Value
Unity (1)
Communality
Variance
Total Variance
Common
Variance
extracted
Variance not used
Copyright 2010 Pearson Education, Inc., publishing as Prentice-Hall.
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Two Criteria . . .
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Number of Factors?
A Priori Criterion
Latent Root Criterion
Percentage of Variance
Scree Test Criterion
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Rules of Thumb 33
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Rotation of Factors
Factor rotation = the reference axes of the factors
are turned about the origin until some other position
has been reached. Since unrotated factor solutions
extract factors based on how much variance they
account for, with each subsequent factor accounting
for less variance. The ultimate effect of rotating the
factor matrix is to redistribute the variance from earlier
factors to later ones to achieve a simpler, theoretically
more meaningful factor pattern.
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Rotated Factor II
V1
V2
+.50
-1.0
-.50
Unrotated
Factor I
+1.0
V3
V4
+.50
-.50
V5
-1.0
Rotated
Factor I
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Orthogonal
Rotation: Factor II
V1
+.50
-1.0
-.50
Oblique
Rotation: Factor
II
V2
+.50
-.50
V5
Unrotate
d Factor I
+1.0
V3
V4
Oblique
Rotation
: Factor
I
Orthogonal
Rotation: Factor I
-1.0
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Equimax (combination)
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Rules of Thumb 34
Choosing Factor Rotation Methods
...
...
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= <) .
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Sample Size
for
350
250
200
150
120
100
85
70
60
50
Significance is based on a .05 significance level (a), a power level of 80 percent, and
standard errors assumed to be twice those of conventional correlation coefficients.
*
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Rules of Thumb 35
Assessing Factor Loadings
factor loadings of +.30 to +.40 are minimally
While
acceptable,
values greater than + .50 are considered
necessary for practical
significance.
To be considered significant:
o A smaller loading is needed given either a larger sample
size, or a larger number of variables being analyzed.
o A larger loading is needed given a factor solution with a
larger number of factors, especially in evaluating the
loadings on later factors.
tests of significance for factor loadings are
Statistical
generally
very conservative and should be considered
only as starting points needed for including a variable for
further consideration.
Copyright 2010 Pearson Education, Inc., publishing as Prentice-Hall.
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Rules of Thumb 36
Interpreting The Factors
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Confirmatory Perspective.
Assessing Factor Structure Stability.
Detecting Influential Observations.
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Rules of Thumb 37
Summated Scales
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Rules of Thumb 38
Factor scores:
Advantages:
1) represents all variables loading on the factor,
2) best method for complete data reduction.
3) Are by default orthogonal and can avoid complications
caused by multicollinearity.
Disadvantages:
1) interpretation more difficult since all variables contribute
through loadings
2) Difficult to replicate across studies.
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Customer Type
Industry Type
Firm Size
Region
Distribution System
Variable Type
nonmetric
nonmetric
nonmetric
nonmetric
nonmetric
Product Quality
E-Commerce Activities/Website
Technical Support
Complaint Resolution
Advertising
Product Line
Salesforce Image
Competitive Pricing
Warranty & Claims
New Products
Ordering & Billing
Price Flexibility
Delivery Speed
metric
metric
metric
metric
metric
metric
metric
metric
metric
metric
metric
metric
metric
Outcome/Relationship Measures
X19
X20
X21
X22
X23
Satisfaction
Likelihood of Recommendation
Likelihood of Future Purchase
Current Purchase/Usage Level
Consider Strategic Alliance/Partnership in Future
metric
metric
metric
metric
nonmetric
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Component
2
3
Communality
4
X9 Complaint Resolution
X18 Delivery Speed
X16 Order & Billing
X12 Salesforce Image
X7 E-Commerce Activities
X10 Advertising
X8 Technical Support
X14 Warranty & Claims
X6 Product Quality
X13 Competitive Pricing
.933
.931
.886
Sum of Squares
Percentage of Trace
2.589
2.216
1.846
1.406
8.057
25.893 22.161 18.457 14.061 80.572
.898
.868
.743
.940
.933
.892
-.730
.890
.894
.806
.860
.780
.585
.894
.891
.798
.661
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