A critical look at the use of SEM in international business research

Purpose: Structural equation modeling (SEM) has been widely used to examine complex research models in international business and marketing research. While the covariance-based SEM (CB-SEM) approach is dominant, we argue that the field’s dynamic nature and the sometimes early stage of theory development more often require a partial least squares SEM (PLS-SEM) approach. Our study critically reviews the application of SEM techniques in the field. / Methodology: We searched six journals with an international business (and marketing) focus (Management International Review, Journal of International Business Studies, Journal of International Management, International Marketing Review, Journal of World Business, International Business Review) from 1990 to 2013. We reviewed all articles that apply SEM, analyzed their research objectives and methodology choices, and assessed whether the PLS-SEM papers followed the best practices outlined in the past. / Findings: Of the articles, 379 utilized CB-SEM and 45 PLS-SEM. The reasons for using PLS-SEM referred largely to sampling and data measurement issues and did not sufficiently build on the procedure’s benefits that stem from its design for predictive and exploratory purposes. Thus, the procedure’s key benefits, which might be fruitful for the theorizing process, are not being fully exploited. Furthermore, authors need to better follow best practices to truly advance theory building. / Research limitations/implications: We examined a subset of journals in the field and did not include general management journals that publish international business and marketing-related studies. Furthermore, we found only limited use of PLS-SEM in the journals we considered relevant to our study. / Value of the paper: Our study contributes to the literature by providing researchers seeking to adopt SEM as an analytical method with practical guidelines for making better choices concerning an appropriate SEM approach. Furthermore, based on a systematic review of current practices in the international business and marketing literature, we identify critical challenges in the selection and use of SEM procedures and offer concrete recommendations for better practice. /