ABSTRACT
It is important to think about the nature of a construct before deciding how to estimate it. For a formative construct, the indicators influence the construct, and a linear composite such as a weighted mean or sum score is justifiable. For a reflective construct, the construct influences the indicators, and it is more appropriate to estimate it with a reflective latent variable that reflects the common variance among the indicators using structural equation modeling, factor analysis, or item response theory.
Causal indicators may not be correlated whereas effect indicators must be correlated. Suggestions to sample all facets of a construct when determining indicators is necessary only for causal indicators. For effect indicators of a unidimensional construct, equally reliable measures are interchangeable. For effect indicators, high correlations are desirable. For causal indicators, too high of a correlation between indicators is likely to introduce the problem of multicollinearity, so lower correlations are optimal.
