integrating deductive
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103
Introduction
Opinions are divided am ongst researchers as
to what constitutes legitimate inqu iry and
warrant able knowledge in specific situations.
Indeed there appear to be two diametrically
opposing views. On the one hand there is the“experimentalist”, “hypothetico-deductive”
or “positivist” and on the other the “natu ralis-
tic”, “contextual” or “interpretative”
(Henwood and P idgeon, 1993, p. 15). One
starts from the need to test theory and th e
other to develop theory. T his creates a dilem-
ma for the researcher faced with a research
question where theory exists but m ay not be
appropr iate in t heir particular circumstances.
T his is the problem we faced. We were inter-
ested in exploring how entrepreneurs used
trust to mitigate customer-perceived risk in
start-up situations. Whilst th ere is an exten-
sive literatu re on the developm ent of tru st
(Mayer et al., 1995: McAllister, 1995) which
allowed the form ulation of a deductive
research design, it had not been applied in this
situation and ou r experience in th e field sug-
gested that it m ay not be entirely appropriate.
We needed to incorporate an inductive
approach into the design.
T his paper draws upon a study of the ways
in which entrepreneur s use trust to mediate
custom er perceived risk at the star t of a ven-
ture in ord er to show how researchers can
combine elements of both app roaches in an
epistemologically consistent way.
The hypothetico-deductive approach
T he p urist hypothetico-deductive perspective
“... emphasises un iversal laws of cause and
effect on an explanatory framework which
assumes a realist ontology; that is that realityconsists of a world of objectively defined
facts” (H enwood and Pidgeon, 1993, p. 15).
In th e deductivist trad ition the researcher
starts “... with an abstract , logical relationship
among concepts then m ove(s) towards con-
crete empirical evidence”, (N euman , 1997,
p. 46). T hus in deductivist research there is a
well-established role for existing theor y since
it informs the d evelopment of hypotheses, the
choice of variables, and the resultant mea-
sures which researchers intend to u se. Withinthis paradigm the scientist formulates a par-
ticular theoretical framework and then sets
about testing it. In an example of this
approach which was relevant to our research,
Qualitative Market Research: An International Journal
Volume 2 · Number 2 · 1999 · pp. 103–110
© MCB University Press · ISSN 1352-2752
Integrating deductiveand inductiveapproaches in a study
of new ventures andcustomer perceived risk
Haider Ali and
Sue Birley
The authorsHaider Ali is a Lecturer in Marketing at Cranfield
University, Silsoe, UK.
Sue Birley is a Professor at The Management School,
Imperial College, London, UK.
Keywords
Consumer behaviour, Consumer’s risk, Entrepreneurs,
Qualitative techniques, Risk management, Start-ups
Abstract
Draws upon a study of t he ways in which entrepreneurs
use trust to mediate customer perceived risk at the start of
a venture in order to show how researchers can combine
elements of both approaches in an epistemologically
consistent way. Specifically, researchers seeking to use an
inductivist/quali tative approach can start wi th an a priori
specification of constructs, perhaps in the form of a model.
One of the ways in which this can help researchers is to
identify where they should look in order to find the
phenomena of int erest to them. We argue that the differ-
ence between inductivist and deductivist research is how
they draw upon existing research: in inductivist research
theory can be used where it is composed of constructswhil e theory represented in the form of variables is more
appropriate in hypothetico-deductive research.
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Moorman et al. (1993) study the factors that
determ ine users’ trust in their researchers.
T heir theoretical framework shows that vari-
ous antecedents influence “user trust” in the
researcher and, in turn, th is influences the
utilisation of market research information.
For example “perceived researcher interp er-
sonal characteristics” are an antecedent to
trust; one of the component s of these is the
“perceived expertise” of researchers. Their
theory hypothesises a relationship between
user tru st in the researcher and researcher
expert ise. The basis for th e hypothesis lies in
previous work by Crosby et al. (1990) . Since
the researchers have specific measures for
expertise they are able to t est whether the
hypothesised relationship actually exists.
Qu ant itative or “logical positivist/quan tita-tive” methods (Deshpande, 1983) for data
gathering and analysis are comm only associat-
ed with such approaches.
T he value of such an approach is that
researchers are able to make use of previous
researchers work. H owever, its limitat ion is
that it is only possible to test whether or not ,
or to what extent, the hypothesised relation-
ships exist. T his approach does not help the
researcher to identify what other unan tici-
pated factors may exist such as, for example,
contingent variables or new constru cts. More-
over the researcher can lose the richness of
data which respondent s can provide as a
conversation develops in a more unstructu red
setting (Mintzberg, 1979; Pettigrew, 1988).
T he qu alitative approach does not suffer from
these shor tcomings.
The qualitative approach
Van M aanen (1979) says that the term “quali-
tative” has no precise meaning, that it is anum brella term which covers a variety of tech-
niques, “... which seek to describe, decode,
translate and otherwise come to terms with
the meaning, not the frequency of certain
more or less naturally occurring phenom ena
in the social world” (Van M aanen, 1979,
p. 520) (our italics). In order to gain that
meaning qualitative m ethods emphasise,
“... the representation of reality through the
eyes of participants” (H enwood and Pidgeon,
1993, p. 16). T he focus is on the respondentand it is their reflections and opinions that
should guide the research, so that “... a
qualitative researcher begins with a research
question and little else but b egin(s) with
deta iled observations of the world and
move(s) towards more abstract generalisa-
tions and ideas” (Neum an, 1997, p. 334).
T his distinction between qualitative and
inductivist research on the one hand and
quan titative and deductivist research on the
other is also made by Deshpande (1983). H e
draws on Reichardt and C ook (1979) to
conclud e that an area of different iation
between the qualitative and quant itative
parad igms is that in the qualitative paradigm
research is “grou nded, discovery oriented,
exploratory, expansionist, descriptive,
inductive” whilst the quantitative paradigm
research is “ungrounded, verification-
oriented, confirmator y, reductionist, inferen-
tial, hypothetico-deductive” (D eshpande,
1983).We would argue that this is not a helpful
dichotomy and that using theory to drive
qualitative research, thus introducing a degree
of deductivism to the d ata gathering process,
does not rule out our ability to describe and
explore per se although it may reduce the
extent to which we can explore (see, for
example, Fetterman and Pitman, 1986).
It is how theory is used that matters
Whereas the hypothetico-deductive approach
starts with theory expressed in the form of
hypotheses, which are then tested , qualitative
research avoids this, in order to prematurely
close off possible areas of enquiry (Bryman ,
1988). I f theory does play a role, it is later in
the research p rocess: “... the belief (with
which qualitative research is more commonly
associated) that theoretical reflection ought to
be delayed until a later stage in the research
process” (Bryman, 1988, p. 91).
If it were widely recognised that the ab overecommendation could be followed prod uc-
tively, then there would be no need for the
discussion in this paper. H owever, it has been
recognised that moving away from such a
“purist” approach can have benefits. Indeed,
Eisenhard t (1989, p. 536) notes that
researchers can benefit from an: “... a priori
specification of constructs” which “ ... can
help shape th e initial design of theory building
research”. In fact starting with a completely
clean slate has been argued to be very rare. AsBryman (1988, p.73) notes “Ethnographers
rarely adopt a stance of being ‘sponges’
whereby they simply absorb the subject’s
interpretations”. T his implicit recognition
104
Integrating deductive and inductive approaches
Haider Ali and Sue Birley
Qualitative Market Research: An International Journal
Volume 2 · Number 2 · 1999 · 103–110
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that p ure indu ctivism may be d ifficult to
pract ice has been made explicitly “although
the qualitative and quan titative approaches
are polar opposites: it should be kept in m ind
that individual researchers in all areas, includ-
ing marketing, fall somewhere along the
continuum between the two extremes”
(Deshpande, 1983, p. 104). T here is, howev-
er, some reticence about going much further.
Eisenhard t (1989, p. 536) cautions
researchers that they should avoid: “thinking
abou t specific relationships between variables
and theor ies”. Neverth eless, it is possible for
the induct ivist researcher to acknowledge
both their interest in specific constructs, and
also their und erstanding of the relationships
between them. What Eisenhard t cautions
against is specifying relationships betweenvariables.
Clearly, this distinction between constructs
and variables is important. Bacharach (1989)
citing Kaplan (1964, p. 55 ) says, “constructs
may be defined as terms which though not
observable either d irectly or ind irectly may be
applied or defined as the basis of the observ-
ables”. Bacharach (1989) a lso cites Schwab
(1980) for the definition of a variable as “an
observable ent ity which is capable of assum -
ing two or more values”. So, for example,
“performance” is a construct for which
“sales” or “retur n on investment” is the
variable.
Developing models using constructs
Up to now researchers have distinguished
between inductivist and hypothetico-
deductive research on the basis of the
presence or absence of theory. We would
argue that there can be a middle ground – one
where existing theor y is used but is presentedin the form of constructs rather th an vari-
ables. This would be synergistic with the
qualitative approach to research, since the
whole tenor of a data gather ing exercise which
is premissed on constructs rather than vari-
ables can be more fluid and adaptive to the
needs of the respondent . T his enables the
researcher to “d iscover” issues or effects
which they may not have had in mind when
the investigation began. So, for example,
asking a respondent about the performance of their firm leaves it open for a discussion of any
one of a nu mber of variables (e.g. sales,
market share, profitab ility). In deed, t aking
this approach assumes that the responden t
would ident ify and focus on the variables
most importan t to them. In contrast, if the
researcher specifically asks about profits, th is
would close off some potential areas of
enquiry. Consequently, we would argue that
the qu alitative researcher can use mod els to
guide their investigations but that they should
be composed of constructs rather than
variables.
T here are two add itional advantages in
using models composed of constructs. First,
since the qualitative researcher is often
advised to deal only with general them es
rather than specific questions, this means that
different respondents may well discuss differ-
ent variables. In such a situation the a p riori
specification of constr ucts provides a useful
means of making sense of the disparate infor-mation provided by various respondent s.
Moreover, since in the subsequent analysis
the researcher is challenged to ident ify the
links between variables and con structs, this
approach allows the responden ts to help to
explain what the relationships are in their
particular circumstances. Fur therm ore they
can help to distinguish between different
constructs.
Second, con structs provide a focus for
research but un like variables they are inher-
ently more general and as such leave open the
scope for generating un intended findings.
After all, in reality there is a clear pressure on
researchers to generate find ings about a
specific topic – to focus their research. Id enti-
fying specific constru cts with which to work is
an aid to this. T his does not, however, pre-
clude the opportu nity to find new constructs
which are relevant to the research question.
Ind eed, this flexibility is a real strength of the
approach we espouse.
Table I shows the differences between thepurist inductive and deductive approaches
and our view as to a combinat ion of the two.
How existing theory can be used inqualitative research: a case study
Having argued that qu alitative researchers can
use models composed of constructs the ques-
tion is how in practical research they can be
used. T he following discussion addresses
some practical issues as to how theory can beused in qualitative research. We consider in
turn the help theory can provide in choosing a
context for the research, the choice of ques-
tions to be asked of respondents and finally
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Integrating deductive and inductive approaches
Haider Ali and Sue Birley
Qualitative Market Research: An International Journal
Volume 2 · Number 2 · 1999 · 103–110
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the tabulation of interview data. To illustrate
our argument, we demon strate the approach
used in our exploration of the u se of trust in
mitigating customer-perceived risk in new
ventures. It is an apposite time in the develop-
men t of this part icular field which is still
relatively new. For example, Sexton (1987,
p. 402) notes that “In 1980, the field was
beginning to emerge” and “research meth od-
ology has also advanced significant ly, bu t th e
application of more advanced techn iques is
still not a standard of the research”. As Smilor
(1987, p. xii) notes, we continue to be con-
cerned to und erstand “what he or she (the
entrepreneur) does”.
D eveloping the mo del
In designing their stud y, researchers may start
with an interest in a par ticular construct or
phenom enon. In our case, we began with a
curiosity as to how entrepreneurs used “tr ust”
to generate sales opportu nities in the creation
of a new ventu re. Whilst there was an exten-
sive exploration, an d discussion, of this
construct in the literature, to our knowledge,
it had rarely been explored in the
entrepreneur ial context. N evertheless, the
literature distinguished between the different
bases that may lead to on e individual trusting
another. It may be because of:
• T heir particular personal characteristics
(characteristic based trust). For example,
they may be mature and carry gravitas
(Rotter, 1980).
• T heir previous interactions (process based
tru st). For example, they may have worked
together as customer and supplier in a
previous employment (Good , 1988).
• T he rule of law (institutional based trust).
For example, the ind ividual is a qualified
doctor or works within a recognised and
respectable organisation (N eu, 1991).
T his existing knowledge was impor tant. It
allowed us to develop the model shown in
Figure 1 and helped us to identify the imper-
sonal and personal bases of trust, the m echa-nisms individuals use to find out whether
someone else is trustworthy, and the specific
reasons why customers may think an entrepre-
neur is trustworthy. As well as helping us to
106
Integrating deductive and inductive approaches
Haider Ali and Sue Birley
Qualitative Market Research: An International Journal
Volume 2 · Number 2 · 1999 · 103–110
Table I The integrated approach compared to purist versions of the deductive and inductive approaches
Stage Purist deductive Purist inductive Integrated approach
1. Develop theoret ical Area of enquiry identifi ed – Develop theoretical
framework but no theoretical framework framework based on constructs
2. Variables identified for Respondents identify Some variables identified
relevant constructs const ruct s and explain t he for relevant construct s –relationship between them others can be identified
by respondents
3. Instrument development Broad themes for discussion Researcher converts the a
identified priori theoretical framework
into atheoretical questions
4. Respondents give answers Respondents discuss general Respondents discuss the
to specific questions themes of interest seemingly general questions
and identify constructs which
are meaningful t o them and
explain the realtionships
between the constructs5. Answers analysed in terms Researcher develops theory Respondent data analysed
of prior theoretical framework on a purely inductive basis according to existing theory.
OR theory is developed on an
inductive basis – without
regard to the existing theory.
6. Outcome Outcome Outcome
Theory tested according to Theory developed Either
whether hypotheses are Existing theory is adapted
accepted or rejected Or
Alternative theoretical
framework is presented
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“recognise” the relevant evidence when we
came across it, the model was also useful in so
far as it helped us to con textualise our find ings
in term s of existing research. Since the model is
composed of constru cts it is holistic, in the
sense that although it is based on trust between
individuals, it can also be used to categorise the
use of elements of the marketing mix. For
example, usage of warran ties can be
categorised as using institut ional based trust.
On the other hand, the usage of high prices asan extrinsic cue for quality would be cate-
gorised in the same group as reputation, since
both are methods customers use to determine
whether a m arketer is trustworthy.
Selecting the sample
Our study was concerned with the p rocess
used by the ent repreneur in creating their
venture and an examination of the theor y also
helped us to constru ct a sample which allowed
us to captu re the likely diversity of process-
based tru st. In order to achieve this, we used
the following criteria:
• It was important that we included some
people who had had no previous interac-
tion with their target customers, and where
there would be an absence of process based
trust. T his would give us the opportunity
to gather evidence of how entrepreneurs
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Integrating deductive and inductive approaches
Haider Ali and Sue Birley
Qualitative Market Research: An International Journal
Volume 2 · Number 2 · 1999 · 103–110
Bases of Trust
personal & impersonal reasons whythe customer should trust the marketer
Institutional
because of the rule of lawe.g. warranties
(can lead to emotional trust)
1st Level of distinction:between the state and the individual
2nd Level
of distinction:between theindividual’s
characteristicsand theirbehaviour
Characteristic - Based
because of who they are(can lead to emotional trust)
Process- Based
because of how they behave(can lead to cognitiveand emotional trust)
Reasons why customersthink entrepreneurs are
trustworthy
Ability
Integrity
Benevolence
Customers can find out
whether entrepreneursare trustworthy t hrough
the following:
Reputation
Social learning
Self-disclosure
Demonstration of trust builds trust
Behavioural
Enactment
customer overcomesperceived risk and
enters into exchange –demonstrates trust
in marketer
Figure 1 Model demonstrating bases of t rust based on existing knowledge
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make use of tru st where ostensibly none
ought to exist.
• In order to provide for a broad range of
cases, diversity of indu stry was important
(Van de Ven, 1991) .
• In order to screen out “non-serious” busi-
nesses or those with a very limited scope of
operations, we limited our search to those
businesses in the process of raising ventu re
or development capital.
• Since “new venture creations is a continu-
ous process rather than a discrete event”
(Birley, 1984, p. 65) we sought bu sinesses
less than five years old.
For ty entrepeneurs were interviewed from a
range of businesses that included , for exam-
ple, floatation chambers, rowing machines,
soy sauce manufacturing, dental practice, and
credit card software.
T his deliberate choice of sample would not
prejudice the inductive nature of the enquiry;
indeed Yin (1984) recommend s that cases in
qualitative research can be selected either
because similar results are pred icted (literal
replication) or to generate different results for
predictable reasons (theoretical replication).
Existing theor y was also useful in h ighlight-
ing the link between risk and tru st. T his was
an impor tant notion because it provided us
with an additional means both of finding tru st
and also of recognising it. T hus we could
search for the use of tru st in situations where
the entrepreneurs perceived some form of
risk. Clearly, the building of an entirely new
custom er base fulfilled this criterion since the
conceptual relationship had a correlate in th e
practical notion of “customer perceived risk”,
which m arketers can t ry and overcome using
the “elements of the marketing mix” (EM M).
T he literature suggests that the effectiveness
of strategic choices of the m arketing mix may
be due to their tru st-bearing properties. So,
for example, Wiener and Mowen (1986) have
argued that an important trait d etermining
the success of salespeople is how trustwor thy
customers perceive them to be. Pricing can be
used as a means of influencing customer
predictions of produ ct performance. Cus-
tomers may use high price as an extrinsic cue
for inferring produ ct quality (Bearden an d
Shimp, 1982) , i.e. they may demonstrate
greater tr ust in a product if it has a relatively
high price.
Questions sho uld be atheoretical
H aving used theory to guide our choice of
respondents and also the respondents’ activi-
ties on which we wanted to focus, the final
issue was how we should question them.
Whilst the literature did p rovide oppor tun ities
to follow a deductive path and construct some
form of survey instru ment, we rejected th is.
Qu ite simply, we were not convinced that
existing theory was sufficiently robu st to
capture the par ticular complexities of trust
and customer perceived risk in th e entrepre-
neurial situation. T herefore, we continued
down th e qualitative path.
Our aim was to find ou t how entrepreneurs
manage customer perceived risk. Clearly one
mean s of doing this would have been to ask
them directly how this was done. H owever,
that would have run counter to th e need to
collect data in th e interviewee’s own term s.
Naturally it would also have presupposed
their interest in the subject and their linking
trust with risk. Our task was to develop a
means of questioning the respondent in such a
way that th ey would lead us to risk and trust
but in such a way that there should be no
tautological guarantee of this. In order to
maintain objectivity, we had to rely on respon-
dents taking us to trust and r isk through th eirown volition. So althou gh we knew the exis-
tence of the theoretical link between risk, tru st
and entrepreneurs’ marketing activities, in
order to maintain objectivity it was impor tant
that the link was not d isclosed to them.
T he questions we asked were what ele-
ments of the marketing mix they used and
why they used th em. So, for example, we
might say “H ow did you go about getting your
first ord ers?” followed by “Why did you do it
that way?” T he first question requ ired only adescript ive answer, which had no theoretical
implications, but t he second qu estion leaves it
open to the respond ent to say, in their own
terms, that it was customer perceived r isk
which mot ivated usage of the specific EM M
and that it was because of the credibility or
trust associated with the EM M that they felt
that they would be effective. For example a
clothing manufacturer said that they had used
a sales agent because of the credibility he
would br ing when making sales to retailers.
Similarly a fitness machine man ufacturer u sed
retailers rather then sell direct, part ly because
customers believe that the former can be
relied upon to give independent ad vice.
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Integrating deductive and inductive approaches
Haider Ali and Sue Birley
Qualitative Market Research: An International Journal
Volume 2 · Number 2 · 1999 · 103–110
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of their characteristics, may possibly lead to
the constructs the researcher is interested in.
Finally, as previous commentators on
method ology have remarked (Bryman, 1988),
very few researchers star t off with a “clean
slate”, and very few are able to funct ion as
sponges – merely gathering up everything that
is told to them. H aving taken for granted th at
most researchers und ertake some form of
literature review, and also having taken for
granted that researchers develop interest in
some issues or constru cts, we have sought to
show why an a priori interest should not
reduce the quality of research or indeed be
“glossed” over in em barrassment.
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Integrating deductive and inductive approaches
Haider Ali and Sue Birley
Qualitative Market Research: An International Journal
Volume 2 · Number 2 · 1999 · 103–110