Application of PLS-SEM for small scale survey: An empirical example of SMEs

Abstract

Recent developments in Structural Equation Modelling (SEM) have been claimed to add some sophistication onto quantitative research methods' usage in terms of their research versatility, efficiency and practicality in a range of disciplines including Information Systems, Marketing, and People Management research. Although covariance based SEM (CB-SEM) is most prominent, application of partial least square structural equation modelling (PLS-SEM) is an attractive alternative. This paper examines and applies the characteristics of PLS-SEM onto SMEs to see whether the efficiency, practicality and versatility assumptions, as claimed, do actually contribute to SMEs' business entrepreneurship in practice. The research question is therefore 'Do the embedded PLS-SEM assumptions of research versatility, practicality and efficiency actually translate into practical reality in SMEs operating in an emerging economy context?' We used a quantitative method data analysis technique as a precursor to help us identify the types of challenges faced by SMEs at both the micro and macro levels of analysis. Primary survey data from 212 Bangladeshi SMEs located at various geographic districts provide the study's population. We assess the application of the technique as a research methodological tool and its limitations provided the basis for us to develop and validate a partial least square based structural equation model (PLS-SEM) as part of a small scale survey-based research on SMEs. These methodological insights then led to a successful framing of SMEs in a model that contributes to a process of identifying which types of challenges are more critical for SMEs' growth. Our results show that for SMEs to be competitive, the business and research benefits of our modelling and methodological technique should be given foreseeable attention by both academics and business practitioners. This methodological perspective is yet to gain researchers and professional practitioners' attention from SMEs' business perspective. By applying the statistical PLS technique to Business and Management Studies research we are contributing to a deeper understanding and knowledge creation in examining the assumptions, the design and application of a sophisticated research tool for the development of People Management, Business and SME theory and practice with a focus on an emerging economy.