Research Project Report

Business Research Methods
Chapter 3. Theory Building
Dr. Werner R. Murhadi

http://www.wernermurhadi.wordpress.com/
www.wernermurhadi.wordpress.com
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After studying this chapter, you should be able to
1. Define the meaning of theory
2. Understand the goals of theory
3. Understand the terms concepts, propositions,
variables, and hypotheses
4. Understand the scientific method
Theory
• Students sometimes think their classes or course
material are “too theoretical” or lacking “practical
application.”
• Theories are simply generalizations that help us
better understand reality. If a theory does not
hold true in practice, then that theory holds no
value.
• A theory is a formal, testable explanation of
some events that includes explanations of
how things relate to one another.
Two Purposes Of Theory
• Understanding, to gain an understanding

of the relationship among various
phenomena.
• Prediction, a theory enables us to predict
the behavior or characteristics of one
phenomenon from the knowledge of
another phenomenon.
Concept (or Construct)
• A generalized idea about a class of

objects, attributes, occurrences, or
processes that has been given a name
• Concept are abstraction of reality
• “leadership,” “productivity,” and “morale”
• “asset” and “inflation”
A Ladder Of Abstraction
For Concepts
Increasingly more abstract

Vegetation Asset
Fruit Plant Machinery
Banana Punch Press
Reality Reality
Concepts are Abstractions of Reality
Abstract CONCEPTS
Level
Empirical OBSERVATION OF OBJECTS

Level AND EVENTS (REALITY)
Scientific Business Researchers
Operate at Two Levels
• Abstract level
– concepts
– 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, but is quite
general and not really testable)
• Empirical level
– variables
– hypotheses
Definitions
• 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.
• Empirical level -Level of knowledge
reflecting that which is verifiable by
experience or observation.
Abstract Level
• Concepts abstract reality.

• Propositions are statements concerned
with the relationships among concepts.
Proposition at Abstract Level
Concept A Concept B
(Reinforcement) (Habits)
Hypothesis at Empirical Level
Dollar bonus for Always makes

sales volume four sales calls
over quota a day
• A hypothesis is a proposition that is
empirically testable. It is an empirical
statement concerned with the relationship
among variables.
• A variable is anything that may assume
different numerical values.
Theory Building A Process Of
Increasing Abstraction
Increasingly more abstract

Theories
Propositions
Concepts
Observation of objects
and events (reality )
re
C
r
te
in
Deductive Reasoning
Pr
F
PD
al
rtu
Vi
y
bu
to
re
• The logical process of deriving a
he
k
ic
conclusion from a known premise or
cl
e,
lin
something known to be true.
is
th
e
ov
– We know that all managers are human
m
re
to
beings.
h
is
w
u
– If we also know that John Smith is a manager,

yo
if
e,
re
– then we can deduce that John Smith is a

rf
fo
F
D
human being.
2P
D
O
G
ith
w
F
PD
e
at
re
C
Inductive Reasoning
• The logical process of establishing a

general proposition on the basis of
observation of particular facts.
– All managers that have ever been seen are
human beings;
– therefore all managers are human beings.
Scientific Method
The use of a set of prescribed procedures

for establishing and connecting theoretical
statements about events and for predicting
events yet unknown.
The Scientific Method:
An Overview
Assess Formulate Statement

Design
relevant concepts & of
research
existing Propositions Hypotheses
knowledge
Acquire Analyze & Provide

empirical evaluate explanation--
explanation
data data state new
problem
Theory and Poems
A fact without a theory
Is like a ship without a sail,
Is like a boat without a rudder,
Is like a kite without a tail.
A fact without a figure is a tragic final act,
But one thing worse in this universe
Is a theory without a fact.

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Business Research Methods

Chapter 3. Theory Building

Dr. Werner R. Murhadi

• Understanding, to gain an understanding

• A generalized idea about a class of

Increasingly more abstract

Fruit Plant Machinery

Banana Punch Press

Empirical OBSERVATION OF OBJECTS

• Abstract level -In theory development, the

• Concepts abstract reality.

Hypothesis at Empirical Level

Dollar bonus for Always makes

Increasingly more abstract

– If we also know that John Smith is a manager,

– then we can deduce that John Smith is a

• The logical process of establishing a

The use of a set of prescribed procedures

Assess Formulate Statement

Acquire Analyze & Provide

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