In addition, the SEM holds the capability to test models with multiple dependent variables. It also holds the capability to model mediators and residuals.
It is essential to consider here that since the model and data have been given prior to the assignment, only model testing, results and interpretation shall seek the attention of performance here. The data therefore shall be put in the Amos software and the model shall be tested to obtain the results. The results obtained can be utilized for the modification of the model. However, it is essential to consider here that a change can result in a change in model's meaning. It is therefore essential to consider whether or not the changes hold consistency with the theory. If the results reveal the need for change in the model then it should be done. However, since theory was not provided for the practical assignment, the changes should be performed in the light of cautious steps.
The essential task is to find out as to what extent does the independent variable (reputation, skill, information exchange, power and flexibility) predict trust (independent variable). In addition, it is also required to find whether or not trust is a mediator to long-term orientation.
It is important to note that all the variables have been presented in an oral shape in the figure above. The oral shape on the variables represents the fact that they are latent variables. Since all the variables were provided in the data set, it can be assumed that these were provided on the basis of factor scores and therefore these variables no longer remains latent variables, but become observed variables. Therefore one should conceptualize them as observable variables from this point of time.
The presented model above has no covariance shown between the five independent variables. Since the task of assignment is to specify that the above model is based on covariance, there exists a dominant need to add bi-directional arrows between the five independent variables.
It is important to note here that the five independent variables are exogenous because they have no prior casual variable. In addition, it is essential to understand that trust is a mediating variable and is an effect of other five mentioned exogenous variables, and it results in long-term orientation, a dependent variable. It is essential to note here that both trust and long-term orientation are endogenous variables.
The model shows no residuals, so they are required to be allocated to endogenous variables. This is because the residuals are unobserved and thus have to be depicted as ovals.
Normality and sample size
Evaluation of absolute model fit can be done by means of probability of chi-square test. However, it is important to consider here that the probability of chi-square test if highly sensitive to both sample size and non-normality in distribution of variables. It is therefore essential to find out whether or not the variables are distributed in normal patter