Hypothetico-Deductive Method in Business Research

Continued from: Types of Research

Hypothetico is derived from the term "hypothetical" which means academic, contestable, contingent, disputable, imaginary, questionable, refutable, theoretical and unconfirmed.

Under this method, one tries to list down possible reasons concerning any problem and finds solutions considering one reason at one time. In this way, all invalid reasons may be eliminated and a valid reason may come up. This is simple but called scientific method as it is a step-by-step approach.

For example, a person finds that the picture on his TV screen is blurry. He can think of few reasons such as (i) loose cable connections, (ii) defective tuner, (iii) picture tube no good or (iv) disrupted transmission from TV station. The person would check cable connections and if it is OK, would call his friends or neighbors if the reception of their TV is normal. Having confirmed this, he would call Electronic Technician for a checkup. It may transpire that fault for blurry picture lies in the picture tube requiring replacement. If the TV is under warrantee, replacement would pose no problem, else the poor fellow would have to cough up Rs.6,000-10,000 for picture tube, parts and installation. If so, the problem is solved.

Why called hypothetico-deductive because one has to identify the problem, guess out reasons thereof and examine them one by one. An educated guess is known as "hypothesis" which means assumption, belief, presupposition, proposal, starting point and theorem. Observations which run contrary to those predicted are taken as evidence against the hypothesis; observations which are in agreement with those predicted are taken as corroborating the hypothesis. It is the same as we solve everyday problems but there is only a small twist which is termed as ‘Null & Alternate Hypothesis”. Given below is a simple example of blurry picture:

Null Hypothesis: There is no problem with the connections.

Alternate: There is some problem with the connections.

If we check and find out the connections were indeed loose, we would reject the “Null” and accepting the Alternate. If by adjusting the connection, our problem is solved, well and good else we move to next set of Null and Alternate Hypothesis concerning TV Transmission and so on so forth. This would be discussed later.

As Karl Popper suggested, it very difficult to prove a reason as valid by induction i.e. specific to general. Suppose we found one MBA who is intelligent. On this specific basis alone, we cannot generalize that all MBAs are intelligent. (It is not a case of natural science but social science). We can be proved wrong just by citing an example of one unfortunate MBA who happened to be a stupid. As Karl pointed out "no amount of evidence assures us that contrary evidence will not be found." He proposed that using deduction method *general to specific), one can falsifty a statement making the alternate true like:

Null Hypothesis: No MBA is intelligent.

Alternate: All MBAs are intelligent.

We can reject Null Hypothesis by citing example of an MBA, Omer Khan, who had secored an IQ of 120 . If null-hypothesis is rejected or proved false, the alternate would become true and all MBAs would be considered as intelligent even though all may not be so. In fact, the researcher hides his findings in the alternate hypotheses for acceptance by simply rejecting the Null Hypotheses.

Falsification is the main characteristic of hypothesis testing. It involves making a specific statement and then finding contrary evidence through experiments or observations. This is known as the hypothetico-deductive method.

Being scientific in nature, the aforesaid method is common to all disciplines like economics, physics or biochemistry. It has basic four stages as shown below:

1. Identify the hypothesis to be tested
2. Generate prediction from the hypothesis
3. Use experiments to check whether predictions are correct.
4. If the predictions are correct, then the hypothesis is confirmed. If not, then the hypothesis is disconfirmed.

For better explanation, the four stages can be increased to seven stages as shown in the diagram.

In a local chain store, ChenOne, there was a large turnover of employees in the first half of 2009. The management became perturbed and asked around reasons for leaving the job. There were no satisfactory answers. Maybe the reasons for job-turnover were evident like (i) opening up of few chain stores of international repute, (ii) boom condition in North of the country or in Dubai or (iii) closure of one branch spreading fear that the chain stores are gradually being closed down. If so, one need not conduct research.

In the second stage, an investigator should collect secondary data which may be helpful in solving the problem. Job turnover may have been experienced in some other stores or industries, what were the reasons thereof and how the problem was tackled. If possible, secondary data may be obtained on the basis of age, gender and experience. At the same time, the investigator should find out opportunities for advancement and job satisfaction in the company as well as in industry. Some structured interviews may be conducted of personnel leaving the jobs known as “exit-interview”

In the third stage, the problem should be narrow down from general phenomena to a specific research question like “to what extent age, gender, work experience and opportunities predict organizational commitment". A researcher is expected to find positive correlation between organizational commitment and all those factors. This would be helpful making hypothesis or testable proposition like “as an employee gets older, it increases his or her commitment to organization”. (If subsequent data collection pointed out that older employees have shown more job-turnover, the investigator would look somewhere else for a solution.

There are various ways to test the hypothesis like correlational studies, analytical studies, and cross-sectional studies. All employees may be interview or only a reasonable sample through a random selection or systematic.

At the final stages, the data collected be processed, presented and analyzed and interpreted. It may transpire that the job-turnovers were triggered by some out of turn promotions. The management was advised to implement a career plan, make job-enriched and assure a fair policy in promotion. Also special bonuses may be given for completing five or ten years of service.

If per chance, a good solution had not come up with all the effort, the investigator would go back to the third phase and re-vise the hypothetical model.

Business research is a systematic process of gathering information for aid in making business decisions and development of business standards and processes. It covers all areas of business such as accounting, finance, MIS, market, human resource management and operations management. Some major areas are stated as under:

Market research

It addresses issues pertaining to advertising, product image, packaging and pricing, after-sale services and demand analysis. Market Research is widening through application of econometrics to marketing and political marketing techniques.

Technology and Operations Management

Business research under this area covers a variety of subjects like organizational design, simulation, and management of technology, new product development and innovation.

Management research

Topics such as employee attitude and behavior, impact of changing demographics on management practices are studies.

Accounting

Two main concerns in accounting are: reporting profitability and finding true cost of each product. Various systems have been evolved like ABC and EVA etc. Similarly, in order to achieve targeted profit, a company must have a budgetary control which entails further studies of the business environments. Further, area of research includes capital markets, social responsibility and environment accounting, ethics and behavioral implications.

Finance:

Topics are studied like appropriateness of financial structure, raising funds through equity or debt, financial leverages and impact on profitability. There are various other issues as valuation methods, risk mitigation with options and future contracts.

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