THEORY BUILDING

What you wil l learn in this chapterr To understand the ooals of

theory.r To define the meaning of

theory.I To understand the terms

concept, proposition, variade,and hypothesis.

r To understand that becauseconcepts abstract reality, it ispossible to discuss concepisat various levels of abstraction.

r To understand the scientif icmethod.

r To discuss how theories aregenerated.

WHAT ARE THE GOAI.IS OF THEORY?

TO THE POINT'Tlrcctrics dre trets cast to cdtclltrh,tt tYe cdll "tlrc wttrld": tttrdtililalizc, to exPlain, and tcti lt(lster it. lLe endcal'otu t0 ,ttf lkcilrc: mesh ever -fiuer and -finer.

R. POPPEII .THE LOGICOF SCIENTI FIC I) ISCOVEI\Y

THE MEAIII}I8 OF T}IEORY

theoryA coherent set of general ProPosi-tions used to explain the aPParentrelationships among certai nobserved phenomena. Theoriesallow generalizations beyond indi-vidual facts or situations.

GOHGEPTS

conceptA generalized idea about a classof objects; an abstracti0n of realitythat is the basic unit for theorvdevelopment.

A scientist investigating business phenomena wallts to knorv rvhat protltrccsinflation. Another person wants to kno'uv if org:rnizational strtlcttlre influe rlcesleadership sryle. Both want to be able to predict behavior, to be able to s:rr- rhrtif we do sn.h and such, then so and so rvil l happen'1

Prediction ancl understanding are the two Ptlrposes of thec''rr ' . 'Accornplishing the first goal allorvs the theorist to predict the. behavior orcharactiristics of one phenomenon fi'om the knorvledge of anothe r phenottr-enont characteristics. A business researcher nr:ly theorize thrrt older itlr-estorstend to be more interested in investnlent incorlle than younqer investors.Thistheory, once verified, shoulcl allor,v researchers to predict the_ inrportatlce ofexpected dividend yield on the basis of investors' ases. The abiliq' to .trtci.-i-p.i. frt,tre conditions in the environnlent or in an orqallization ttr:rv be.*tr.nt.|y valuable, yet prediction alone nlay not satisfl' the scie ntiflcresearcher's goals. Successfllly forecasting an election olltcollre does llot srt-isfl, one's cJriosiry about the reason tulry a candidate woll the election' A..i.rr.h.r also wants to gain understanding. In most sitttatiotrs, of cotrrse. pre-diction and understanding go hand in hand. To predict phenonlerla. wc l i l trsthave an explanation of r,vhy variables behave as they do.Theories provide rheseexplanations.

Like all abstractions, the word "theory" has been used in nlany different wa)'i.in many differenr contexts, at times so broadly as to inciude almost all descrip-tive statements about a class of phenomena, and ac other times so narrolvly asto exclude everything but a series of terms and their relationships that satis-fies certain iogical requirements.r

For our purposes, a theory is a coherent set of general propositions, use.1 asprincipler oi .*planation of the apparent relationships of certain observedph.no*.na.A key element in our definition is the term proposition. Before rve

i^r ,.. what a proposition is, however, we must discuss the nature of r/le.'rcri-cal concepts.

Theory development is essentially a process of describing phenonrenr atincreasingly higher levels of abstraction. Things that we observe c;rlr bedescribed as concepts. A concept (or construct) is a geleralized. idea about aclass of objects, attribr-rtes, occurrences, or processes that has beert qivett lrnanle. If you, as an organizational theorist, *Lt. to describe phenonretra sltclt

", ,.rp.r,risory behavior, you would categorize empirical everlts or real tlrings

into concepts. Concepts are building blocks, and in orgarlizirtional theor\',"leadership," "productiviry," and "rnorale" are concepts. In

-the theon' of

finance, "fross national product," "asset," and "inflatiotl" are fi-equeiltlV trsed

concePts.Corr..pts abstract realify.That is, concepts are expressed in 'uvords that retbr

to various events or objects. Fo, .".urple, the concept "asset" is an abstract terl1l

that may, in the conirete world of realiry refer to a specific punch pressmachine. Concepts, horvever, nray vary in degree of abstraction.The abstraction

ChaPter 3 TheorY Building 41

Exnrelr 3. I A IADDER oF ABsrRAcrtoN FoRCONCEPTS

Vegetation

Fruit =EF.= (/)3<(J

ladder of abstraction0rganization of concepts insequence from the most concreteand individual to the most general.abstract levelln theory development, the level ofknowledge expressing a concept thatexists only as an idea or a qualityapart from an object.empir ical levelLevel of knowledge that is verifiableby experience or observation.

ladder in Exhibic 3.1 indicates that it is possible to discuss concepts at variouslevels of absrrac.tion' Moving up the liooer of absrraclion, the basic conceptbecomes more abstract,lvider in scope, and less amenable to nleasurement.Thebasic or scientitlc business researchei operates at rwo levels: on the abslract levelof concepts (and propositions) and on the empirical level of variables (andhypotheses). At the empirical level, we "experienc^e" realiry-that is, we observeor rnanipulate objects or evenrs (see Exhibit 3.2).a-

If the organizational researcher says "Older workers prefer different rewardsthan younger r"norkers," rwo concepts-age of rvorke, and reward preference-are the subjects of this abstract statement. If the researcher wishes to test thishypothesis,John, age 19, chuck, age 45,and Mary, age 62-along with otherr'vorkers-may be qllestioned about their pr.f.i.rr.".s for ,rh.fr retiremenrplans, intrinsic job satisfaction, and the like. i{ecording their ages'and observ-ing their stated preferences are activities that occu,

"t ih. .-pi"rical level.

Researchers are concerned rvith the observable world, o, *hrt we shallloosely ternl "realiry."Theorists translate their conceptualizatton of realiry into

CoNcEPTs ARE ABsTRAcTIoNs oFREALITYExsrerr 3.2

Abstract Level

Empirical Level0bservations of 0bjects and Events

(Reatity)

42 Part 1 lntroduction

T() TH E POI NT

ty is merely an illusiott,a uery persistent orte.

ALI]ERT EINSTEIN

proposit ionA statement concerned with the rela-tionships among c0ncepts; an asser-tion of a universal connectionbetween events that have certainproperties.

scienti f ic melhodTechniques or procedures used toanalyze empirical evidence in anattemptto confirm or disprove priorconceptions,

THEoRY BUTLDING IS A PROCESS OFI NCREASI NG ABSTRACTION

Theories,fI

Propositions

AI

Concepts

AI

Exnrerr 3.3

Rcalittlltcit

.9o(g

U'

oc,l,c,c)

J

0bservations of Objects and Events

abstract ideas.Thus, theory deals with abstraction.Things are not the essence oftheory;ideas are.5 Concepts in isolation are not theories. Only when we explainholv concepts relate to other concepts do lve begin to construct theories.

I{ATURE OF PROPOSITIOIISConcepts are the basic units of theory development. However, theories requirean understanding of the relationship among concepts. Thus, once realiry isabstracted into concepts, the scientist is interested in the relationship amongvarious concepts. Propositions are statements concerned with the relationshipsamong conceprs.A proposition explains the logical linkage among certain con-cepts by asserting a universal connection berween concepts.A proposition statesthat every concept about an event or thing either has a certain property orstands in a certain relationship to other.o.r-.ptt about the event or thing.6

Consider the follorving behavioral science proposition that permeates manybusiness theories: If reinforcements follow each other at evenly distributed inter-vals, and everything else is held constant, the resulting habrj will increase instrength as a positive growth function of the number of trials./ This propositionidentifies theorerical relationships benveen the concepts "reinforcements" and"habit." It identifies the direction and magnitude of these relationships.

'W'e have indicated that a theory is an abstraction from observed realiry.Concepts are ar one level of abstraction (see Exhibit 3.3).Investigating proPo-sitions requires that rve increase our level of abstract thinking.When we thinkabout theories, we are at the highest level of abstraction because we are itlves-tigating the relationship berween propositions. Theories are lletworks ofpropositions.

THE SCIE]ITIFIS METHOIIThe scientific method is a set of prescribed procedures for establishing and con-necting theoretical statements about events, for analyzing empirical evidence,and for predicting events yet unknorvn. There is no consensLls concerning exactprocedures for the scientific method, but most discussions of the scientificmethod include references to "empirical testabiliry." Enrpirical means verifiable

Chapter 3 Theory Building

Exxrerr 3.4

l€

Hypothesis

by observation, experinlentation, or experience. The process of empirical veri-fication cannot be divorced from the process of theory development.

A hypothesis is a proposition that is empirically testable. It is an empiricalstatement concerned with the relationship among variables. The abstractproposition "Reinforcements will increase habit strength" may be testedempirically with a hypothesis. Exhibit 3.4 shows that the hypothesis "Bonuspay given for sales volume consistently above quota will be associated with thenumber of sales calls a day" is an empirical counterpart of the proposition.Bonus pay and sales calls are variables, reflecting the concepts of reinforcementand habits. Because variables are at the empirical level, variables may be mea-sured. Thus, the scientific method has two basic levels:

... the enrpirical and rhe abstract, conceptLral.The enrpirical aspect is prima-rily concerned with the facts of the science as revealed by observation andexperiments. The abstract or theoretical aspect, on the other hand, consists ina serious attempt to understand the facts of the science,and to integrate thenrinto a coherent, i.e., a logical, system. From these observations and integra-tions are derived, directly or indirectly, the basic laws of the science.8

HYPoTHESEs ARE THe EuPIRICALCOUNTERPARTs oF PRoPoStTIoNs

Proposition

AbstractLevel

hypothesisAn unproven proposition or suppo-sition that tentatively explains certainfacts or phenomena; a propositionthat is empirically testable.

variableAnything that may assume differentnumerical values.

AI{ EXAMPTE OF A THEORYExhibit 3.5 is a simplified portrayal of a theory to explain volunrary jobturnover-that is, the movenlent of employees to other organizations. Twoconcepts-(1) the perceived desirability of nrouernent to another organization and(2) the perceiued ease of ntouenrcnt from the presentjob-are expecred to be theprimary determinants of intention to quit. This is a proposition. Further, theconcePt intentiott to qtit is expected to be a necessaty .ot dltion for the actualuoluntary job turnouer hehauior to occur. This is a second proposition that linksconcepts together in this theory. In the more elaborate theory,job peformanceis another concept considered to be the prinrary determinant influencing

Part 1 lntroduction

Exxrerr 3.5 A BASIC THEORY EXPLA!NtNGvoLUNTARY JoB TuRnoveR9

Job performance

Labor market conditions,number of organizations,

personal characteristics, andother partial determinants

of ease of movement

Perceived ease ofmovement (e.9., expectation

of f inding alternatives,unsolicited opportunities)

Perceived desirability ofmovement (e.9., job

satisfaction)

Equity of pay, job complexity,participation in decisionmaking, and other partial

determinants of desirabilitvof movement

both perceiued ease of nrcuenrcilt and perceiued desirability of ilrcuemeilt Moreover,perceived ease of nlovement is related to other concepts such as labor nrcrketconditions, rumrber of organizatiorts uisible to the individual, and personal character-rsrics. Perceived desirabiliry of rnovement is influenced by concepts such aseqity of pay, _iob conrplexity, and participatiort in decisiott nnking.

A conrplete explanation of this theory is not possible; horvever, this exam-ple should help you understand the terminology used by theory builders.

VERIFYII{G THEORY

p roTHE PoINT{f .fncts cttnflia uih a theory,cithcr the tlrcory nutst ba changedttr tlrcfacts.

I ]ENEI)ICT SPINOZA

In most scientific situations there are alternative theories to explain certainphenonrena. To deternrine rvhich is the better theory, researchers gatherempirical data or make observations to veri$r the theories.

Maslow's hierarchical theory of motivation offers one explanation ofhunran behavior. For exanrple, Maslo'uv theorizes that individuals rvill attenlptto satisry physiological needs before self-esteem needs. An alternative view ofmotivation is provided by Freudian (psychoanalytic) theory, rvhich suggeststhat unconscious, enrotional inrpulses are the basic influences on behavior.One task of science is to determine if a given theoretical proposition is falseor if there are inconsistencies betlveen conlpeting theories.Just as records aremade to be broken. theories are made to be tested.

It nrust be possible to demonstrate that a given proposition or theory is false.This may at first glance appear strange. Why "falsc" rather than "true"?

Chapter 3 Theory Building

L-__

THEORY AND SONG

This song (attributed to George Schultz, aformer U.S. Secretary of State) is sung to thelively tune Sr7ye r DollarJo

HOW ARE T}IEORIES

A fact without a theoryls l ike a ship without a sai l ,ls like a boat without a rudder,ls like a kite without a tail.A fact without a figurels a tragic final act,But one thing worseIn this universels a theory without a fact.

Technically, there nray be other untested theories which could account for theresults we obtained in our study of a proposition.At the very least,there maybe a competing explanation which could be the "real" explanation for a givenset of research findings.Thus, we can never be certain that our proposition ortheory is the correct one.The scientist can only say,"I have a theory which Ihave objectively tested with data and the data are consistent with my theory."If the possibiliry of proving an idea false or wrong is not inherent in our restof an idea, then we cannot put much faith in the evidence that suggests ir robe true. No other evidence was allowed to manifest itself.ll

Business research gathers facts to verifli theories. However, the researcherr,vho wishes to identift inconsistency within a particular theory mLrsr under-stand the difference between facts and theories:

Facts and theories are different things, not rungs in a hierarchy of increasingcertainry. Facts are the world's data. Theories are structures of ideas thatexplain and interpret facts. Facts do not go a'uvay when scientists debate rivaltheories to explain them. Einstein's theory of gravitation replaced Ne'uvton!,but apples did not suspend themselves in midair pending the outcome.l2

GEHERATED?Many students ask, "'Where do theories come from?" Although this is nor aneasy question to answer in a short chapter on theory in business research, weshall nevertheless explore this topic briefly.

In this chapter, theory has been explained at the abstract, conceptual leveland at the empirical level. Theory generation may occur at either level.

At the abstract, conceptlral level, a theory nay be developed with deduc-tive reasoning by going from a general statement to a specific assertion.Deductive reasoning is the logical process of deriving a conclusion about a spe-cific instance based on a known general premise or something known to be

deducl ive reasoningThe logical process of deriving ac0nclusi0n about a specific instancebased on a known general premiseor something known to be true.

46 Part 1 lntroduction

BALLISTIC THEORY

Ballistic theory is a theory because it deals withmeasurable factors, because it states their relation-ships in detail, and because any one factor can befairly completely determined by a knowledge of allthe others.13 Given all of the factors except the initialspeed of the projectile, an engineer can determinewhat that speed was. Asked to change the point ofimpact, he can suggest several ways in which thiscan be accomplished-all of which will work.

It is common knowledge that the behavioral sci-ences are not as advanced as the physical sci-ences. What this means, in effect, is that no onehas yet defined all of the factors in human behavioror determined the influence that each has on

inductiue reasoningThe logical process of establishing ageneral proposition on the basis ofobservation of particular facts.

events, In fact, no one has really done a very goodjob of determining what an event is, that is, how tomeasure it or what to consider relevant about it.

Again, an example may help explain thedilemma. lt is irrelevant to ballistic theory that JohnGingrich is standing beside the 155 mm ri f le whenit is fired. lt may not be irrelevant to consumerbehavior theory that he is standing beside the per-son who selects a necktie. lt is not relevant to bal-listic theory that the gunner's father once carried anM-l. lt may be relevant to consumer behavior the-ory that the automobile purchaser's grandfatheronce owned a Ford.

true. For example,'uve know that all managers are lutman beings.lf we also knowthat Steue Hazelwood is a manager, then we can deduce that Steue Hazelwood isa hwnan being.

At the empirical level, a theory may be developed with inductive reason-ing. lnduclive reasoning is the logical process of establishing a general propositionon the basis of observation of particular facts.All nranagers that have ever beenseen are human beings; therefore, all rnanagers are human beings.

Suppose a stockbroker with 15 years'experience trading on the NewYorkStock Exchange repeatedly notices that the price of gold and the price of goldstocks rise whenever there is a hijacking, terrorist bombing, or nrilitary skir-mish. In other words, similar patterns occur whenever a certain rype of eventoccurs. The stockbroker may induce from these enrpirical observations themore general situation that the price of gold is related to political stability.Thus, the stockbroker states a proposition based on his or her experience orspecific observations.

Over the course of time, theory construction is often the result of e conrbi-nation of deductive and inductive reasoning. Our experiences leed us to clrarvconclusions that we then try to veri$r empirically by using the scientific rnethod.

OUERUIEW OF THE SGIEIITIFIC METHODIt is useful to look at the analytic process of scientific theory building as aseries of stages. Seven operations may be vierved as the steps involved in theapplication of the scientific method:

1. Assessment of relevant existing knorvledge of a phetronrenon2. Formulation of concepts and propositions

Chapter 3 Theory Building

-

47

3. Statement of hy'potheses4. Design of research to test the hypotheses5. Acquisition of nreaninsful empirical data6. Analysis and er':rltration of data7. Proposal of :rn exphn:rr ion of the phenonlenon and statement of nerv

problenrs raised by the researchl4

An excellent overvierv of the scientific nrethod is presented in RobertPirsis's book Zetr attd thc .,|rt ttf il[otorcycle L,Idintenance:

Actu:rllv I've never seen :l cycle-nrairltenrnce problern conrplex enough reallyto require full-sc;rle forrnal scienrific nrethod. Repair problerns are not thath;rrd.Wlien I think o[fornral scientific nlethod an inrage sometimes comes tonrind of :rtt etronltoLls j,tggern,tr'tt,:r huge bulldozer-slorv, tedious,lttmbering,l:rborious, but inr-incible. It takes nvice as long, five times as long, maybe aclozen rinres as lonq as inionnal nrechanic's techniques, but you knorv in thecnd yotr're going to set it. Therek no fault isolation problenr in motorcyclenr:.rintenirnce that c:rn stand up to it.When you've hit a really tough one,triedeverythinu, racked votrr brrin and nothinq r,vorks, and you kno'uv rhat this rinreN;rture has reallv decided to be difficult, yoll say, "Okay, Nature, that's the endoF the trice gul'," and 1'ou cr;rnk up the forllal scientific nlethod.

For this you keep a lrrb notebook. Everything gets written down, formally,so that you knou' at all tinres 'uvhere you are,lvhere you've been,lvhere you'regoine and where \ou want to get. In scientific work and electronics technol-ogy this is necessary because ocherwise the problems get so complex you getlost in chern and confused and forget 'uvhat you knor,v and what you don'tknow and have to give up. In cycle maintenance things are not that involved,but when confusion starts it's a good idea to hold it down by making every-thing formal and exact. Sometimes just the act of writing dorvn the problemssrraightens out your head as to 'uvhat they really are.

The logical statenrents entered into the notebook are broken down intosix categories: (1) staterxent of the problem, (2) hypotheses as to the cause ofthe problem, (3) experinrents designed to test each hypothesis, (4) predictedresults of the experiments, (5) observed results of the experiments and (6)conclusions from the results of the experiments.This is not different from thefonnal arrangenrent of nrany college and high-school lab notebooks but thepurpose here is no longer just busyrvork. The purpose now is precise guid-ance of thoughts that r,r,ill fail if they are not accurate.

The real purpose of scientific nrethod is to make sure Nature hasn't mis-led you into thinking you know something you don't actually know. There'snot a rnechanic or scientist or technician alive who hasn't suffered from thatone so much thar he's not instinctively on guard.Thati the main reason rvhyso nruch scientific and nrechanical infornration sounds so dull and so cau-tions. If you get careless or go romanticizing scientific information, giving ita flourish here and there, Nature will soon make a complete fool out of you.It does it often enough anylvay even when you don't give it opportuniries.One must be extremely careful and rigidly logical when dealing with Nature:one logical slip and an entire scientific edifice comes tunrbling down. Onefalse deduction about the machine and you can get hung up indefinitely.

In Part One of formal scientific method, which is the statement of theproblen-r, the main skill is in scacing absolutely no more than you are posiriveyou knorv. It is much better to enter a statement "Solve Problem:'Why doesn't

48 Part 1 lntroduction

TO THE,POINT

A motorcycle mechanic . . . whohonks the lnnt to see if the bat-tery works is iryformally conduct-ing a true scientific experinrcnt.He is testittg a hypothesis by put-ting the questi()tt to nature.

ROBET{T M. PIRSIG

cycle rvork?" rvhich sounds dunrb but is correct, than it is to enter a statenlent"Solve Problenr:What is rvrong with the electrical system?" lvhen you clon'tabsoh.rtely knorv the trouble is in the electrical systenr.What you should stareis "Soh'e Problenr:What is wrong with cycle?" and then state as the first entryof PartTh'o:"Hypothesis Nurnber One:The trouble is in the elecric:rl system."You think of as nrany hypotheses as you can, then you design experinrents totest thern to see lvhich are true and rvhich are false.

This careful approach to the beginning qLlestions keeps you frorn takinga major wrorlg turn rvhich nright cause you weeks of extra lvork or can evenhang you up conrpletely. Scientific questions often have a surface appearanceof dunrbness for this reason. They are asked in order to prevent dunrb nris-takes later on.

Part Three, rhrt part of formal scientific nrerhod called experinrentation,is sonretinres thought of by ronrantics as all of science itself because that's theonly p;rrr with rnuch visual suface. They see lots of test tubes and bizarreequipment and people running around nraking discoveries. They do not seerhe experinrerlt as part of a lareer intellectual process and so they often con-fuse experinrents 'uvith denronstrations, lvhich look the sanre. A nran con-ducting a gee-rvhiz science shor,v with fifry thousand dollars' worth ofFrankenstein equipnrent is not doing anything scientific if he knows before-hand rvhat the results of his efforts are going to be. A nrotorcycle mechanic,on the other hand, lvho honks the horn to see if the battery works is infor-mally conducting a true scientific experiment. He is tesring a hypothesis byputting the question to nature. The TV scientist who mutters sadly, "Theexperiment is a failure; we have failed to achieve what we had hoped for," issuffering mainly from a bad scriptwriter. An experiment is never a failuresolely because it fails to achieve predicted results. An experiment is a failureonly when it also fails adequately to test the hypothesis in question, when thedata it produces don't prove anything one way or another.

Skill at this point consists of using experiments that test only the hypoth-esis in question, nothing less, nothing more. If the horn honks, and themechanic concludes that the whole electrical system is working, he is in deeptrouble. He has reached an illogical conclusion. The honking horn only tellshim that the battery and horn are working.To design an experiment properlyhe has to think very rigidly in terms of what directly causes what. This youknow from the hierarchy. The horn doesn't make the cycle go. Neither doesthe battery, except in a very indirect way. The point at which the electricalsystem directll' causes the engine to fire is at the spark plugs, and if you don'ttest here, at the output of the electrical system, you will never really knowwhether the failure is electrical or nor.

To test properly the mechanic removes the plug and lays it against theengine so that the base around the plug is electrically grounded, kicks thestarter lever and watches the spark-plug gap for a blue spark. If there isn't anyhe can conclude one of rwo things: (a) there is an electrical failure or ft) hisexperiment is sloppy. If he is experienced he will try it a few nrore tinres,checking connections, trying every way he can think of to get that plug tofire.Then, if he cant get it to fire, he finally concludes that (a) is correct, there'san electrical failure, and the experiment is over. He has proved that hishypothesis is correct.

In the final category, conclusions, skill comes in stating no rnore than theexperiment has proved. It hasn't proved that rvhen he fixes the electrical

*L-

Chapter 3 Theory Building

systc'nl rhe nrotorcl'cle '"vill strrrt. There nral' be other things wrong. Brrt hedoes kno'uv that the nrotorcycle isn't eoing to run trntil the elecrrical systenr

il:- -'-J','*'T J:,: JI ;T."T;lt ro rnul qu esti o n : " s olve p roble nr : wh at is

He then sets up hypotheses for these and tests thenr. Ily asking the rightqtrestions and choosing the right tests and drarving the right conclusions thenrechanic rvorks his s.ay clorvn the echelons of the nrotorcycle hierlrchy untilhe hrs found the exact specitic cause or causes of the engine failure, and thenhe chenges thenr so that thev no lonser ceuse the failure.

An utrtrained observer rvill see only physical labor:rnd oflen cet the ideathat physical labor is mainly rvhat the nrechanic does. Actually the physicallabor is the snrallest and easiest part of 'nvhat the nrechanic does. Ily tar the

ffi ':i,::;::::::1,:::\":;:"::::*il::::J::,i'.",ffi 'Hyi#:::ing tests.They don't like it *'hen you talk to thenl because they are concen-tratins on tnetttal iutages, hierarchies, and not really looking at you or thephysical nlotorcycle at all.They rre usins the experinrenr as part of a prorranrto expand their hierarchy of knowledge o[ the faulry nrotorcycle and conr-pare it to the correct hierarchy in their nrind.They are lookins at underlyingforI t t . l5

PRAGTIGAT IIATUE OF THEORIESAs the above excerpt makes evident, theories allow us to generalize beyondindividual facts or isolated situations. Theories provide a framework that canguide managerial strategy by providing insights into general rules of behavior.When different incidents may be theoretically comparable in some way, thescientific knowledge gained from theory development may have practicalvalue. A good theory allows us to generalize beyond individual facts so thatgeneral patterns may be predicted and understood. For this reason it is oftensaid there is nothing so practical as a good theory.

SUMMARYPrediction and understanding are the two purposes of theory. A theory is acoherent set of general propositions used as principles of explanation of theapparent relationships of certain observed phenomena. Concepts and propo-sitions are the elements of theory at the abstract level. At the empirical level,theory is concerned with variables and testable hypotheses, the empiricalcounterparts of concepts and propositions.The scientific method is a series ofstages utilized to develop and refine theory.

Key Termstheoryconceprladder of abstractionabstract level

empirical levelpropositionscientific methodhypothesis

variabledeductive reasoninginductive reasoning

Part 1 lntroduction

Questions for Reuiew and Gtitical Thinkingt. What are sonle theories ofibred to explain aspects of

your field of business?Horv do proposirions and hypotheses difttr?Hor,v do concepts differ fronr vari:rbles?Conrment on this sratenrent: "There is nothing sopractical as a good theor\'."

either the theory must be changed or the facts."What is the pracdcal rrreaning of this statenrent?

6. Find another detinition of thett\r Horv is the defini-tion you fbund sinrilar to this booki definition?Horv is it differenr?

The 17th-century f)utchSpinoza said, "lf the facts

philosopher Benedictconflict s'ith a theon'.

l. The Atnerican Herit,tgc Dittitunry t'i rlrc Erlg/islrLangmge can be found at http://u'u'll '.b;rrtlebt:cont/ant/.'What is the definition oi theory qiven atthis site? Hor,v does it conrpare to the definirionsiven irr this chapter?Go to http://n"uwv.utnr.edu/research/iep/ to findthe Internet Encyclopedia of Philosophy. Look up

the tertn logical lt tsitivistrt. Is entpirical verificationinrport;rnt in this treld of philosophy?

3. The Ltlgic o_f Scitrtilic Discttvcrf is an inrportant theo-retical rvork.Visic The Karl Popper'Web site athttp://r,vrvrv.eens.dcu.iel-tkpw/ to learn abour itsauthor and his s'ork.

Case SuggestionCxe 27: Old School versus New School Sports Fans

Chapter 3 Theory Building 51