Management Accounting and Partial Least Squares-Structural Equation Modelling (PLS-SEM): Some Illustrative Examples

Abstract

In management accounting research, the usefulness of Partial Least Squares-Structural Equation Modelling (PLS-SEM) is commonly underestimated. However, those specific characteristics of PLS-SEM that remain unrecognized in management accounting research appear to be tailor-made for answering a variety of relevant research questions. PLS-SEM is particularly appropriate for management accounting because such research is often conducted at an exploratory stage; the theoretical basis is often weak; archival data or formative measurements are highly relevant; and the predictive orientation of PLS-SEM offers the potential to answer practical questions. Based on three highly ranked published articles in management accounting, I demonstrate how PLS-SEM can be useful in this field. First, Ittner et al. (Account Rev 72:231 -255, 1997) illustrate how accounting research can use archival data in PLS-SEM; second, Hartmann and Maas (Account Business Res 41:439–458, 2011) construct an example of the exploratory use of PLS-SEM in management accounting; and third, Burkert and Lueg (Manage Account Res 24:3–22, 2013) use hierarchical latent construct in PLS-SEM in their management accounting research.