Chapter 1:

The Role of Business Research

1. Business Research Defined
2. Business Research Types
3. The Role of Research in Decision-making
Process
4. Determining When to Conduct Business
Research
5. Major Topics for Research in Business
6. Basic Methods of Research
 1. Business Research Defined
•Business research is the systematic and
objective process of generating
information to reduce uncertainty.

•Business research is conducted to

provide valid and reliable answer(s) to
already posed research questions.

•It facilitates the managerial decision

process for all aspects of a business.
 Business Research
• Research information is neither intuitive nor
haphazardly gathered.
• Literally, research (re-search) -“search
again”
• Business research must be objective
• Detached and impersonal rather than biased
 Data versus Information
• Data—the raw facts—record measures of
certain phenomena which are necessary to
provide
• Information—facts in a form suitable for
managers to base decisions on.
 2. Business Research Types

Basic Research:
• Attempts to expand the limits of knowledge.
• Not directly involved in the solution to a
pragmatic problem.

Applied Research:
• Conducted when a decision must be made about
a specific real-life problem
 Types of Research: Basic and Applied

Sources: Easterby-Smith et al. (2008); Hedrick et al. (1993)

 Basic Research Example
• Is executive success correlated with high
need for achievement?
• Are members of highly cohesive work
groups more satisfied than members of less
cohesive work groups?
• Do consumers experience cognitive
dissonance in low-involvement situations?
 Applied Research Examples
• Should McDonalds add Italian pasta dinners to
its menu?
• Business research told McDonald’s it should
not
• Should Procter & Gamble add a high-priced
home teeth bleaching kit to its product line?
• Research showed Crest Whitestrips would sell
well at a retail price of $44
 Research and the Manager
• General Business Conditions and Corporate
Research
• Financial and Accounting Research
• Management and Organizational Behavior
Research
• Sales and Marketing Research
• Information Systems Research
• Corporate Responsibility Research
 3. Research and the Manager

Information is vital to conduct a proper

decision process for successfully:
• Identifying problems and opportunities
• Diagnosis and assessment
• Selecting and implementing a course of
action
• Evaluating the course of action
 The Process of Decision Making

• Decision making
– The process through which managers and leaders
identify and resolve problems and capitalize on
opportunities.
• Problem
– A condition that occurs when some aspect of
organizational performance is less than desirable.
• Opportunity
– Any situation that has the potential to provide
additional beneficial outcomes.
Seven Steps in the Decision-Making Process
Identifying opportunities
and diagnosing problems

Identifying objectives

Generating alternatives

Evaluating alternatives

Reaching decisions

Choosing implementation strategies

Monitoring and evaluating

 Step 1: Identifying Opportunities
and Diagnosing Problems
• The clear identification of opportunities or the
diagnosis of problems that require a decision.
• An assessment of opportunities and problems
will only be as accurate as the information on
which it is based.
 Step 2: Identifying Objectives
• Objectives reflect the results the organization wants
to attain. Also called targets, standards or ends.
– The quantity and quality of the desired results should be
specified, for these aspects will ultimately guide the
decision maker in selecting the appropriate course of
action.
– Objectives can be measured on a variety of dimensions
(monetary units, output per hour, % of defects, etc.) and
whether the objectives are long-term versus short-term.
 Step 3: Generating Alternatives

• Once an opportunity has been identified or

a problem diagnosed correctly, a manager
develops various ways to solve the problem
and achieve objectives.
• The alternatives can be standard and
obvious as well as innovative and unique.
 Step 4: Evaluating Alternatives
• Determining the value or adequacy of the alternatives
generated.
• Predetermined decision criteria may be used in the
evaluation process.
– Quality desired
– Anticipated costs
– Benefits
– Uncertainties
– Risks
 Step 5: Reaching Decisions

• Decision making is commonly associated

with making a final choice.
• Although choosing an alternative would
seem to be a straightforward proposition, in
reality the choice is rarely clear-cut.
 Step 6: Choosing Implementation
Strategies
• The bridge between reaching a decision and
evaluating the results.
• The keys to effective implementation are:
– Sensitivity to those who will be affected by the
decision.
– Proper planning and consideration of the
resources necessary to carry out the decision.
 Step 7: Monitoring and
Evaluating
• No decision-making process is complete
until the impact of the decision has been
evaluated.
• Managers must observe the impact of the
decision as objectively as possible and take
further corrective action if it becomes
necessary.
4. Determining When to Conduct
Business Research
• Time constraints
• Availability of data
• Nature of the decision
• Benefits versus costs
 When to Conduct Business Research?

Availability Nature of Benefits vs.

Time Constraints of Data the Decision Costs
Is the information Does the value
Is sufficient time Is the decision Conducting
Yes already Yes Yes of the research Yes
available before of considerable
on hand information Business
a managerial strategic
inadequate exceed the cost Research
decision or tactical
for making of conducting
must be made? importance?
the decision? research?

No No No No

Do Not Conduct Business Research

 Value Should Exceed
Estimated Costs
Costs
Value •Research expenditures
•Delay of business
•Decreased certainty
decision and possible
•Increased likelihood of
disclosure of
a correct decision
information to rivals
•Improved business •Possible erroneous
performance and
research results
resulting higher profits
 Internal versus External
Consultants / Researcher
• Some organizations have their own research
department, which might be called: - The
management services department - The
organization and methods department - R & D
(research and development department)
• Such a department within the organization serves as
the internal consultant if it face certain problems
and seek help.  This unit would be useful in
several ways
Advantages of Internal Researchers
• The internal researchers have better chance of
being readily accepted by the employees.
• The team would require much less time to
understand the structure, the philosophy and
climate and work system of the organization.
• They would be available for implementing their
recommendations after the research findings are
accepted.  The internal team might cost
considerable less than the external team.
Disadvantages of Internal Researchers
• They might have less fresh ideas and perspectives that might
be needed to correct the problems.  There is scope for
certain powerful groups in the organization to influence or
misrepresent certain facts.
• There is a possibility that the internal researchers are not
perceived as “experts” by the management, and hence their
recommendations do not get the consideration and attention
they deserve.  Certain organizational biases of the internal
research team might make the findings less objective and less
scientific.
 Advantages of External Consultants
• They have a wealth of experience from having
worked with different types of organizations
that have had the same or similar types of
problems.  They might have more knowledge
of current sophisticated problem-solving models
through their periodic training programs.
Disadvantages of External Consultants
• The cost of hiring an external research team is
usually high.  They need a considerable time
to understand the organization to be researched.
 They seldom get a warm welcome, nor are
accepted by employees.  They charges
additional fees for their assistance in the
implementation and evaluation phases.
 Ethics and Business Research
• Ethics in business research refers to a code of
conduct of behavior while conducting research.
 Ethical conduct applies to the organization and
the members that sponsor the research, the
researchers who undertake the research, and the
respondents who provide them with the
necessary data.
• the members that sponsor the research should do
it in good faith, pay attention to what the results
indicate, and pursue organizational rather than
self-interest.
 Ethics and Business Research
•  Ethical conduct should also be reflected in
the behavior of the researchers who conduct the
investigation, the participants who provide the
data, the analysts who provide the results, and
the entire research team that presents the
interpretation of the results and suggests
alternative solutions.
 Theory Building
1. Definition of Theory
2. Levels of Reality
2.1. Constracts
2.2. Propositions
3. Scientific Method
3.1. Deductive Reasoning
3.2. Inductive Reasoning
 1. Definition of Theory
A coherent set of general propositions used as
principles of explanation of the apparent
relationships of certain observed
phenomena.

Two Purposes of Theory:

• Understanding
• Prediction
 Theories
A formal, logical explanation of some events that
includes predictions of how things relate to one
another.
What is Good Theory?
“A theory is a good theory if it satisfies two requirements.
It must accurately describe a large class of
observationson the basis of a model that contains only
a few arbitrary elements. And it must make definite
predictions about the result of future observations”
 2. Levels of Reality
• Abstract level (concepts & propositions): 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 (variables & hypotheses):

level of knowledge reflecting that which is
verifiable by experience or observation.
 2.1. Concept (or Construct)
• A generalized idea about a class of objects,
attributes, occurrences, or processes that has
been given a name
• Building blocks that abstract reality
• “leadership,” “productivity,” and “morale”
• “gross national product,” “asset,” and
“inflation”
Theory Building: A Process Of
Increasing Abstraction

Increasingly more abstract

Theories

Propositions

Concepts

Observation of objects
and events (reality )
 2.2. Propositions
• Propositions are statements concerned with
the relationships among concepts.

• 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.
 Types of Variables
• Dependent variable
• The dependent variable is the variable of
primary interest to the researcher. The
researcher‘s goal is to understand and describe
the dependent variable, or to explain its
variability, or predict it. In other words, it is
the main variable that lends itself for
investigation as a viable factor
• The presumed “effect” in theoretical model
 Dependent variable
• A manager is concerned that the sales of a
new product introduced after test mar-
keting it do not meet with his expectations.
The dependent variable here is sales. Since
the sales of the product can vary—can be
low, medium, or high—it is a variable;
since sales is the main focus of interest to
the manager, it is the depen- dent variable.
 Dependent variable
• An applied researcher wants to increase the
performance of organizational members in a
particular bank.
• What would be the dependent variable in
this case?
 Independent variable
• An independent variable is one that influences
the dependent variable in either a positive or
negative way. That is, when the independent
variable is present, the dependent variable is also
present, and with each unit of increase in the
independent variable, there is an increase or
decrease in the dependent variable also. In other
words, the variance in the dependent variable is
accounted for by the independent variable.
• The presumed “cause” in the theoretical model.
• Research studies indicate that successful new
product development has an influence on the stock
market price of the company. That is, the more
suc- cessful the new product turns out to be, the
higher will be the stock market price of that firm.
Therefore, the success of the new product is the
indepen- dent variable, and stock market price
the dependent variable.
• A manager believes that good supervision
and training would increase the production
level of the workers.
• List the variables in this exercise,
individually, and label them as dependent
or independent, explaining why they are so
labeled. Diagram the relationships
 Moderating variable
• The moderating variable is one that has a
strong contingent effect on the inde-
pendent variable–dependent variable
relationship. That is, the presence of a third
variable (the moderating variable) modifies
the original relationship between the
independent and the dependent variables.
• List and label the variables in this and the
following exercise and explain and diagram the
relationships among the variables.
• A manager finds that off-the-job classroom
training has a great impact on the productivity of
the employees in her department. However, she
also observes that employees over 60 years of age
do not seem to derive much benefit and do not
improve with such training.
• A visitor to a factory observes that the workers in
the packing department have to interact with one
another to get their jobs done. The more they
interact, the more they seem to tend to stay after
hours and go to the local pub together for a drink.
However, the women packers, even though they
interact with the others as much as the men, do
not stay late, nor do they visit the pub after work
hours.
 Mediating Variable
• is one that surfaces between the time the independent
variables start operating to influence the dependent
variable and the time their impact is felt on it. There
is thus a temporal quality or time dimension to the
intervening variable. The intervening variable
surfaces as a function of the inde- pendent
variable(s) operating in any situation, and helps to
conceptualize and explain the influence of the
independent variable(s) on the dependent variable
• List and label the variables in the following
situation.
• The manager of Haines Company observes that the
morale of employ- ees in her company is low. She
thinks that if their working conditions are
improved, pay scales raised, and the vacation
benefits made attractive, the morale will be
boosted. She doubts, however, if an increase of pay
scales would raise the morale of all employees.
• Her conjecture is that those that have
supplemental incomes will just not be
―turned on‖ by higher pay, and only those
without side incomes will be happy with
increased pay with resultant boost of
morale.
 3.1. Deductive Reasoning
• The logical process of deriving a conclusion
from a known premise or something known
to be true.
– We know that all managers are human beings.
– If we also know that John Smith is a manager,
– then we can deduce that John Smith is a human
being.
 3.2. 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.
Figure 1: Process of Research Steps wise