FIRST ORDER MEASUREMENT MODEL OF BUSINESS ENVIRONMENT

CHARACTERISTICS (bec)
Business environment characteristics of the manufacturing firms have been studied using
the six factors of Business cost, Labour availability, Competitive hostility, Government laws and
regulations, Political environment and Dynamism. hese six factors are validated and accepted
!n !ndependent "easurement "odel by performing #irst $rder "easurement "odel
Confirmatory #actor %nalysis. !t helps to study the model very closely. he first order
measurement model displays the values of &
'
as

()'.*+, P as ,.,,, &
'
-df as ../+, G#! as ,.*),
%G#! as ,.*/, C#! as ,.)* and 0"12% as ,.,3/. hese results reveal that all the pre4re5uisites
for the acceptance of the #irst $rder "easurement model are well met.
%fter establishing the individual item reliability of the model, the validity of the model is
next tested. he results are presented in able (.*.
TABLE 5.8 First Order Mes!re"e#t M$de% $& bec
Tb%e
Res!%ts $& First Order Mes!re"e#t M$de%
(C$#&ir"t$r' Fct$r A#%'sis)
Res!%ts $&
Re%ibi%it'
Test
Ite"s
Ite"s St#drd
S$%!ti$#s
Fct$r
esti"te
t (
)%!e
Err$r
)ri#ce
R
*
C R AVE
B!si#ess c$st
"ounting labor cost BBl ,.() ,.(* ...(/ ,.+( ,.6(
,.*3) ,.(66
"ounting material
cost
BBm ,./3 ,.*. .(.(. ,.3( ,.((
"ounting
transportation cost
BBt ,./3 ,./+ .(.3( ,.3( ,.((
"ounting utility cost BBu ,./( ,./( .(.+, ,.33 ,.(+
"ounting rent BBr ,.*. ,.). ./.(3 ,.63 ,.++
Lb$!r )i%bi%it'
1carcity of managerial
Personnel
BLm ,.* ,.+( ./.3( ,.6+ ,.+3
,.),3 ,.+(6
Dearth of technicians BLt ,./) ,.+/ ./.'* ,.6/ ,.+6
Deficiency of clerical
Personnel
BLc ,.*6 ,./( .*.3( ,.6. ,.+)
1carcity of s7illed and
1peciali8ed Personnel
BLs ,.*' ,./+ .*... ,.66 ,.+/
1hortage of Direct
Labour
BLp ,.* ,./+ ./.(( ,.6+ ,.+3
C$"+etiti)e ,$sti%it'
1tumpy profit margins BClp ,.*' ,.*) .*.,) ,.66 ,.+/ ,.*)( ,.+6'
Dilapidating Local
demand
BCdd ,.*6 ,.)/ .*.(+ ,.6. ,.+)
Dilapidating
!nternational demand
BCdd
f
,.*( ,.)6 .).6. ,.'/ ,./6
Dilapidating Product
1tandards
BCpp ,./. ,.+* .3.+* ,.( ,.(,
Dilapidating 9uality BCuv ,./+ ,./) .+..' ,.36 ,.(/
of %c5uired !nputs
-$)er#"e#t %.s #d re/!%ti$#s
Complex
governmental
regulations and
procedures
BGcg ,./+ ,.*3 .(.)6 ,.36 ,.(/
,.*+( ,.+./
%mbiguous
government laws and
regulations
BGug ,.*. */ ./.(+ ,.63 ,.++
0ed apism and
Delays
BGgd ,.*( ,.)+ .*./* ,.'* ,./'
Government:s
protectionism Policy
owards !ndustries
BGgt ,./' ,./) .3.*3 ,.3* ,.('
0$%itic% e#)ir$#"e#t
Country balance of
payment status
BPcb ,./3 ,./6 .(.(/ ,.3( ,.((
,.**) ,.+./
Bilateral and "ulti4
lateral Governmental
%greements
BPta ,.*' ,.). .*..' ,.66 ,.+/
;ation:s Political
1tability
BPsp ,.* ,.), ./.33 ,.6+ ,.+3
0egulatory
"echanism for
Protecting !nvestments
BPlr ,./) ,.)3 ./.'( ,.6/ ,.+6
"ilitary Coalitions
with fellow countries
BPtm
a
,.// ,.), .+.(( ,.3 ,.+,
D'#"is"
empo of innovative
operations processes
BDri ,.(( ,.(+ .,.+, ,.+) ,.6.
,.*3. ,.(/+
Changing customer
%spirations in the
industry
BDrc ,.*6 ,.*3 .*.,. ,.6. ,.+)
2merging challenges
from competitors
BDre ,.*' ,.*3 ./.** ,.6' ,.+*
0ate of information
diffusion
BDrid ,.* ,.*( ./.,' ,.6/ ,.+6
N$tes1
( )
( ) [ ]

+
=
ej
'
'
loadings ed 1tandardi8
- loadings ed 1tandardi8 y reliabilit Construct
%verage variance extracted <%=2> ? @ <1tandardied loadingA>-n

where
ej
is the measurement error
TABLE 5.21 Re%ibi%it'
C$#str!ct Ite" re%ibi%it' C$#str!ct re%ibi%it' AVE
1uggested value B,.( B,.+ B,.(
S$!rce1 #ornell and Larc7er <.)*.>
he individual reliability of the items was evaluated using factor loadings <CeCsar Camiso
Cn and %na =illar LoCpe8 ',.,>. Carmines and Deller <.)/)> has propogated that the factor
loadings should not be less than ,./,/ to constitute a valid model. Eowever, some researchers
such as Barclay et al., .))( and Chin, .))*> are of the opinion that factor loadings to the extent
of ,.( or ,.+ is acceptable. !n the above table all the factor loadings are above the recommended
value it shows the factors having individual reliability.
he next step is to ensure the internal consistency of all the items used for measuring the
same concept. his can be done through construct reliability which evaluates the rigorousness
with which the latent item is measured by the observable item <#ornell and Larc7er, .)*.>. he
authors have propogated that the %=% value should not be less than ,.( to ensure convergent
validity of the model. he construct reliability should be above ,.+ and table (.'* portrays that
the construct reliability value in respect of all the items far exceeds the minimum re5uisite value.
Eence, all the measurable items command the desirable construct reliability. able (.) displays
that the %=% value in respect of all the constructs far exceeds the minimum threshold value.
Fi/!re 5.3 First Order Mes!re"e#t M$de% $& bec
he model for Business 2nvironment Characteristics <bec> is shown in #igure (./. he
factor loadings in respect of the items far exceed the recommended value of ,.(, and hence they
are significantly important.
5.*.4.5 DISCRIMINAT VALIDIT6
he distinctiveness of a construct from the other constructs in a model is confirmed by
Discriminat validity. his validity may be verified by comparing the %=% with the s5uare of the
correlations of the constructs. able (.., indicates that the %=% values far exceed the s5uare of
the correlation coefficient and hence the discriminant validity of the model is confirmed <#ornell
and Larc7er, .)*.>.
TABLE 5.571 C$rre%ti$# Mtri8 $& I#de+e#de#t D$"i#s
B2C+ B2C( B2C3 B2C6 B2C' B2C.
B2C+ <,.(/(>
B2C( ,.,3* <,.+.*>
B2C3 ,.,3* ,.33* <,.+.(>
B2C6 ,...( ,.,,,) ,.,,.+ <,.+6+>
B2C' ,.,+' ,.'*, ,.6)+ ,.,.) <,.+(.>
B2C. ,.3/+ ,.,,,3 ,.,'' ,.'( ,..') <,.(66>
N$tes1 Diagonal elements <values in parentheses> are the %verage =ariance 2xtracted <%=2>F
off4diagonal elements are the s5uare correlations among constructs.