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Research Methods Notes
Business Research Methods (DMS 502)
University of Nairobi
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UNIVERSITY OF NAIROBI
RESEARCH METHODOLOGY IN FINANCE
COURSE MATERIALS
LESSON ONE: INTRODUCTION TO RESEARCH
LESSON OBJECTIVES
After completing the lesson the learner should be able to:
Define and Describe research
Distinguish between research and scientific method, giving examples, and discussing why they would fall into one or the other of the two areas.
Explain the hallmarks of scientific investigations
Describe the building blocks of scientific investigation
Discuss the various sources of knowledge in research.
Explain why managers should know about research
Discuss how a manager might apply the knowledge gained about research
Just close your eyes for a minute and utter the word research to yourself. What kind of image does this word conjure up for you?
Research Defined
The process of arriving at dependable solutions/ conclusions through planned, systematic collection, analysis and interpretation of data.
Scientific, systematic search or rigorous investigation or inquiry into pertinent information, situation or problem in order to generate new knowledge or validate existing knowledge. It includes collection, presentation, analysis and interpretation of facts that lines an individual’s speculation with reality.
It is the carrying out a diligent inquiry or a critical examination of a given phenomenon. It implies exhaustive study, investigation or experimentation following some logical sequence.
Research is formal work which is undertaken systematically to increase the stock of knowledge, including knowledge of humanity, culture and society, and the use of this stock of knowledge to devise new applications (OECD, 2002). Research often is used to establish or confirm facts, reaffirm the results of previous work, solve new or existing problems, support theorems, or develop new theories.
According to Kothari (2004), Research refers to a search for knowledge. He asserts that it is the scientific and systematic search for pertinent information on a specific topic. In fact, research is an art of scientific investigation.
Research therefore involves the following
Defining and redefining problems
Formulating hypothesis or suggested solutions
Collecting, organizing and evaluating data
Making deductions and reaching conclusions
Testing the conclusions to determine whether they fit the formulated hypothesis
Business Research (what is business research?)
Business research can be defined as an organized, systematic, data-based, critical, objective, scientific inquiry or investigation into a specific business problem undertaken with the purpose describing it, explaining it, predicting it and finding answers or solutions to it.
Research and the Manager. (why do managers require research? In all organizations managers are often faced with big or small problems in various fields and which they have to solve by making the right decisions.
In business research is usually primarily conducted to resolve problematic issues in areas of accounting, finance, management, and marketing.
Business Problem/ Areas What to study Finance and Accounting Budget control systems and practices, inventory costing methods, depreciation, taxation, operations of financial institutions, financial ratios, mergers and acquisitions, corporate financing, behaviour od stock exchange etc. Management Employee attitude and behaviours, human resource management, impact of changing demographics on management practices, production operations management, strategy formulation, information system etc. Marketing Product image, advertising, sales promotion, distribution, packaging, pricing, after sales services, consumer preferences, new product development etc.
Approaches to Business Research
classroom
To enable control. In scientific research, control revolves around being able to regulate the phenomenon under study. For instance, scientific experiments. With the ever increasing complexity of modern organizations, and the uncertainty of the environment they face, research has become one of the constant areas of trouble shooting in the work place. It therefore enables managers to see or sense problems before they get out of control.
To enable explanation of phenomena. Explanation involves correct observation and measurement of a phenomena
To enable theory development: this involves formulating concepts, laws and generalizations about a given phenomena
In summary the purpose of research is to describe, predict, control and explain
Value of Research to Professional Managers
Being knowledgeable about research and research methods helps professional managers to:
Identify and effectively solve minor problems in the work place.
Know how to discriminate good from bad research.
Appreciate and be constantly aware of the multiple influences and multiple effects of factors impinging on a situation.
Make intelligent, educated and well calculated risks in decision making, knowing full well the probabilities associated with different possible outcome attached to failures or successes of their decisions. Research is therefore a useful decision- making tool rather than a mass of incomprehensible statistical information.
Prevent possible vested interests from exercising their influence in a situation. This is because managers have become more knowledgeable about scientific investigations. Distortion or manipulation of information becomes impossible as managers are more aware of likely research biases
Relates to hired researchers and consultants more effectively
Combine experience with scientific knowledge while making decisions.
Research and the Scientific Method
Research may not be theory guided and may be based on hunches, experience and intuition. This is because sometimes the problem is so simple that it does not require elaborate research, and past experience might be necessary to offer solution.
Scientific method on the other hand is an organized system, data-based, critical, objective scientific inquiry that focuses on solving problems using a step by step logical, organized, and rigorous method to identify the problems, gather data, analyze them and draw valid conclusions therefrom.
Scientific method is purposive and rigorous and empirical.
It helps the researchers to state their findings with accuracy and confidence. This helps other organizations to apply those solutions when they encounter similar problems.
Scientific method must be theory guided, thus are referred to as applied research.
Scientific method is based on sound reasoning-finding correct premises, testing and connections between their facts and assumption, making claims based on adequate evidence.
In the reasoning process, deduction, induction, observation, and hypothesis testing can be combined in a systematic way.
Deduction and Induction research
Deduction is the process by which we arrive at a reasoned conclusion by logical generalization of a known fact. It involves moving from general to making specific conclusion. For example it is known that all high performers are highly proficient in their jobs. If peter is a high performer, we can conclude he is highly proficient in his job
Induction is a process where we observe certain characteristics of phenomenon and on the basis of these characteristics, we arrive at conclusions. In induction we logically establish a general proposition based on observed facts and characteristics.
Inductive logic follows a trail, picking up clues that lead to the end of an argument. It entails looking for traits or reasons that lead to conclusion.
For instance:
I loaned my friend sh. 5000 in November and he refused to pay
I loaned him another sh. 5000 just before Christmas, which he hasn’t paid back.
of commitment”.
Replicability: the results of the test of hypotheses should be supported again and yet again when the same type of research is repeated in other similar circumstances.
Precision and Confidence:
Precision refers to the closeness of the findings to “reality” based on a sample. Confidence refers to the probability that the estimations are correct
Objectivity: the conclusions drawn through interpretation of the results of the data analysis should be based on the truth, independence of judgement and impartiality; that is, they should be based on the facts of the findings derived from actual data, and not on our own subjective or emotional values.
For instance, if had a hypothesis that greater participation in decision making will increase organizational commitment, and this was not supported by the results, it make no sense if the researcher continue to argue that increased opportunity for participation will still help.
Generalizability: refers to the degree of applicability of the research findings in one organizational setting to other settings. The greater the applicability, the more useful the research to the users. Can the findings in our case i manufacturing sector, be applicable in service sector.
Parsimony: refer to the simplicity of using few variables to explain the phenomenon and generate solutions to the problem with greater. It entails avoiding complex research frameworks that consider unmanageable number of factors. For instance, if two or three specific variables in the work situation identified would raise organizational commitment by 45% then it’s better than considering 10 variables that would increase organizational commitment by 48%
Systematic: This i m p l i e s t h a t t h e p r o c e d u r e s a d o p t e d to undertake an investigation follow a certain logical sequence. The different steps cannot be taken in a haphazard way. Some procedure must follow others. It follows certain steps that are logical in order.. These steps are: ▪ Understanding the nature of problem to be studied and identifying the related area of knowledge.
▪ Reviewing literature to understand how others have approached or dealt with the problem.
▪ Collecting data in an organized and controlled manner so as to arrive at valid decisions.
▪ Analyzing data appropriate to the problem.
▪ Drawing conclusions and making generalizations.
Controlled: This implies that, in exploring causality in relation of two variables, one set up the study in a way that minimizes the effects of other factors affecting the relationship. This can be achieved to large extent in the physical sciences, as most of the research is done in a laboratory. Give example of law of demand
Valid and Verifiable: the conclusions based on the findings must be correct and must be verifiable by the researcher and other researchers using the same methodology and set up. Empirical: the conclusions drawn should be based upon hard evidence gathered through direct or indirect or from information collected from real-life experiences or observations. It is based on direct experience or observation by the researcher. Critical: S c i e n t i f i c m e t h o d i n v o l v e s critically s c r u t i n i z i n g t h e p r o c e d u r e s u s e d , t h e methods and techniques employed i n c a r r y i n g o u t t h e r e s e ar c h inquiry.
The process of investigation must be fool proof and free from any misgivings. The process adopted and the procedures used must be able to withstand critical test of scrutiny. Research exhibits diligent and precise judgment.
Analytical. Research applies tested analytical procedures in gathering historical, descriptive, and experimental data, and case study.
Sources of Knowledge for Research.
Human beings acquire knowledge of the world around them in different ways and from different sources. These includes
Research/ scientific Method
Experience- personal experience
Tradition
Authority/experts
Conventional wisdom
Beliefs
Emotions
Research/ Scientific Method
LESSON: TWO; Qualities of a Good Research
In addition to tenets of scientific method, more characteristics of good research.
The purpose of research must be clearly defined and common concepts be used
The research procedure used should be described in sufficient details to enable another researcher to repeat the research for further advancement, keeping the continuity of what has already been attained
The procedural design of the research should be carefully planned to yield results that are as objectives as possible
The researcher should report with complete frankness, flaws in the procedural design and estimate their effects upon the findings.
The analysis of data should be sufficiently adequate to reveal its significance. Method of analysis should be appropriate
Conclusions should be confined to those justified by the data of research.
The researcher should be well experienced and has good reputation in research and be a person of integrity
CLASSIFICATION OF RESEARCH
This addresses key areas where research could be done. The following are the criteria for classification of research into different types of research.
According to the Branch of Knowledge According to the Nature of Data According to the Coverage According to Utility or Application According to the place where it is carried out According to the Research Methods used According to the Time Frame According to the purpose of the Study
According to the Branch of Knowledge
Different Branches of knowledge may broadly be divided into two:
Life and physical sciences such as Botany, Zoology, Physics and Chemistry.
Social Sciences such as Political Science, Public Administration, Economics,
Sociology, Commerce and Management.
Business Research: The research carried out, in these areas, is called
management research, production research, personnel research, financial management research, accounting research, Marketing research etc.
Management Research includes various functions of management such as
planning, organizing, staffing, communicating, coordinating, motivating, and controlling. Various motivational theories are the result of research. Production (also called manufacturing) research focuses more on materials and equipment rather than on human aspects. It covers various aspects such as new and better ways of producing goods, inventing new technologies, reducing costs, improving product quality.
Research in Personnel Management may range from very simple
problems to highly complex problems of all types. It is primarily concerned with the human aspects of the business such as personnel policies, job requirements, job evaluation, recruitment, selection, placement, training and development, promotion and transfer, morale and attitudes, wage and salary administration, industrial relations. Basic research in this field would be valuable as human behaviour affects organizational behavior and productivity.
Research in Financial Management includes; financial institutions,
financing instruments (eg. shares, debentures), financial markets (capital market, money market, primary market, secondary market), financial services (egs. merchant banking, discounting, factoring), financial analysis (e. investment analysis, ratio analysis, funds flow / cash flow analysis) etc.,
Accounting Research though narrow in its scope, but is a highly significant
area of business management. Accounting information is used as a basis for reports to the management, shareholders, investors, tax authorities, regulatory bodies and other interested parties. Areas for accounting research include inventory valuation, depreciation accounting, generally accepted accounting principles, accounting standards, corporate reporting etc.
Marketing Research deals with product development and distribution
problems, marketing institutions, marketing policies and practices, consumer
Research Classification According to the Place where it is Carried Out
Depending upon the place where the research is carried out (according to the data generating source), research can be classified into: a) Field Studies or field experiments b) Laboratory studies or Laboratory experiments c) Library studies or documentary research/ desktop research
Research Classification According to the Research Methods used
Depending upon the research method used for the investigation, it can be classified as: a) Survey research, b) Observation research, c) Case research, d) Experimental research, e) Historical research, f) Comparative research.
Research Classification According to the Time Frame
Depending upon the time period adopted for the study, it can be
One time or single time period research - eg. One year or a point of time.
Most of the sample studies, diagnostic studies are of this type.
Longitudinal research - eg. Several years or several time periods ( a time
series analysis) eg. Industrial development during the five year plans in India.
Research Classification According to the Purpose of the Study
What is the purpose/aim/objective of the study? Is it to describe or analyze or evaluate or explore?
Descriptive Study: The major purpose of descriptive research is the description
of a person, situation, institution or an event as it exists. Generally fact finding studies are of this type.
Analytical Study: The researcher uses facts or information already available and analyses them to make a critical examination of the material. These are generally Ex-post facto studies or post-mortem studies.
Evaluation Study: This type of study is generally conducted to examine /
evaluate the impact of a particular event, eg. Impact of a particular decision or a project or an investment.
Exploratory Study: An exploratory study is undertaken when not much is
known about the situation at hand or no information is available on how similar problems or research issue have been solved in the past. The information known on a particular subject matter is little. Hence, a study is conducted to know more about it so as to formulate the problem and procedures of the study. Such a study is called exploratory/ formulative study.
In such cases, extensive preliminary work needs to be done to gain familiarity with the phenomena in the situation, and understand what is happening, before we develop a model and set up a rigorous design for comprehensive study.
In essence exploratory studies are undertaken to better comprehend the nature of the problem since very few studies have been conducted in that area.
Give appropriate example: a manager of a multinational wants to know whether work ethic values of employees working in its subsidiary in Lamu would be different from those of Nairobians.
will be problem solving research. In short, the main aim of applied research is to discover some solution for some pressing practical problem.
Quantitative Research
“Quantitative research refers to the systematic empirical investigation of quantitative properties of phenomena and their relationships”. The objective of quantitative research is to develop and employ mathematical models, theories or hypothesis pertaining to phenomena. The process of measurement is central to quantitative research because it provides fundamental connection between empirical observation and mathematical expression of quantitative relationships. Statistics is the most widely used branch of mathematics in quantitative research. Statistical methods are used extensively with in fields such as economics and commerce. Quantitative research involving the use of structured questions, where the response options have been Pre-determined and large number of respondents is involved. eg:-total sales of soap industry in terms of money value and or quantity in terms of tones for particular year, say 2008,could be researched, compared with past 5 years and then projection for 2009 could be made.
Qualitative Research.
Qualitative research presents non-quantitative type of analysis. Qualitative research involves collecting, analyzing and interpreting data by observing what people do and say. Qualitative research refers to the meanings, definitions, characteristics, symbols, metaphors, and description of things. Qualitative research is much more subjective and uses very different methods of collecting information, mainly individual, in depth interviews and focus groups. The nature of this type of research is exploratory and open ended. Small number of people is interviewed in depth and or a relatively small number of focus groups are conducted. Qualitative research can be further classified in the following type.
i. Phenomenology:-a form of research in which the researcher
attempts to understand how one or more individuals experience a phenomenon. Eg:-we might interview 20 victims of Westgate tragedy.
ii. Ethnography:- this type of research focuses on describing the
culture of a group of people. A culture is the shared attributes, values, norms, practices, language, and material things of a group
of people. Eg:-the researcher might decide to go and live with the tribal in Andaman island and study the culture and the educational practices.
iii. Case study:-is a form of qualitative research that is focused on
providing a detailed account of one or more cases e, we may study a classroom that was given a new curriculum for technology use iv. Grounded theory:- it is an inductive type of research, based or grounded in the observations of data from which it was developed; it uses a variety of data sources, including quantitative data, review of records, interviews, observation and surveys v. Historical research:-it allows one to discuss past and present events in the context of the present condition, and allows one to reflect and provide possible answers to current issues and problems. Eg:-the lending pattern of business in the 19th century.
In addition to the above, we also have the descriptive research Fundamental research, of which this is based on establishing various theories
Also the research is classified in to
Descriptive Research
Descriptive research is a type of research that describes a phenomenon as it exists at present. It is undertaken in order to ascertain and be able to describe the characteristics of the variables of interest in a situation. It includes surveys and fact finding inquiries of all types.
It provides accurate portrayal of characteristics of a particular individual, situation or a group. They are a means of discovering new meanings, describing what exist, determining frequency with which something occurs and categorizing information.
It aims at describing social events, relations and provides background information about an event in question.
Example of Descriptive Research
Finding the most frequent disease that affects the children in a town. The reader of the research will know the symptoms of the disease, what to do to prevent the disease and thus more children will leave healthy life.
In descriptive research, the researcher has no control over the variables and can only report what happened or what is happening. It may be used in cases where the researcher
LECTURE FOUR; VARIABLE
A variable is anything that can take different or varying values.
It is a measurable characteristic that assumes different values among the subjects or units in a given study. It is the property being studied. Examples of variable include: age of house hold head, floor area of a house, net monthly income of an employee, number of siblings in a family, number of hours spent in studying, and consumption of fuel by a vehicle per kilometer etc.
It may be a symbol of an event, act, characteristics, trait, or attitude that can be measured to which can be assigned a categorical value. Variables may assume dichotomous values (employed or unemployed, married or single, male or female) or continuous values (temperature etc)
Give an example using relationship between price and demand
TYPES OF VARIABLES
There are many types of variables, but the common types are:
Independent Variable (Predictor Variable): This is a variable that the researcher manipulates in order to find out or determines its effect on another variable. It can affect the dependent variable positively or negatively. Also called predictor variables because they predict amount of influence on other variables. e.
Influence of frequency of practice on the performance in geometry.
The success of new product development and the performance of stock market prices of a company
Impact of alcohol on reaction time
Effect of income on housing conditions
Influence of gender and level of education on career choice
Practice, new product development, alcohol, income, gender are all independent variables.
Independent variables are used in studies that try to establish relationships but may also be used to establish cause and effect.
From the above as students to identify independent variables
Dependent Variable: this is a variable that is influenced or changed by another variable. It shows the total effect of independent variable. It therefore varies as independent variable varies. It is of primary importance to the researcher. The researcher’s goal is to understand and describe the dependent variable or to
explain its variability, or predict it. Also called criterion or outcome variable. Identify dependent variables from the above examples.
The impact of test marketing of sales performance.
Influence of hours studied on performance in a statistics test.
Effect of distance from supply centre on cost of building materials
Impact of altitude on daily mean temperature, daily mean temperature
The dependent variables in the above examples are: sales performance, performance in a statistics test, cost of building materials,
Control Variable: these are the types of variables that may influence the result of the study without the researcher being aware of them. The researcher needs to control them in order to avoid their effect on the result of the study. Looking at the law of demand, “All other factors held constant, an increase in price leads to a fall in demand and vice versa”. If all these factors are not held constant/controlled, then the relationship between price and demand will not apply.
Extraneous variables: variables which affects the outcome of the study when they are not controlled. E. to study the effect of price on demand which factors are extraneous?
Types of Extraneous Variables
Intervening Variable: a variable caused by the independent variable and it is a determinant of dependent variable. It intervenes between the variables.
Work force diversity and organizational effectiveness. Work force diversity causes creative synergy, special expertise and skills that in turn affects organizational effectiveness The success of new product development and the performance of stock market prices of a company. It is believed that success of new product development most likely increases sales volume and improved profitability, which in turn affects performance of stock market price of a company.
Moderator Variable: this is the variable whose presence modifies the original relationship between the independent and the dependent variable
Availability of manufacturing manual that employees can refer to and the product rejects. This relationship may be affected by presence of inclination or interest.
Work force diversity and organizational effectiveness. The level of managerial expertise may affect how work force diversity affects organizational effectiveness.
The impact of students’ intelligence on academic performance. The effort put by the learner may moderate the relationship between the students’ intelligence and
Research Methods Notes
Course: Business Research Methods (DMS 502)
University: University of Nairobi
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