Marketing Research Methods in Sas

Theoretical Modeling in Marketing

Author(s): K. Sridhar MoorthySource: The Journal of Marketing, Vol. 57, No. 2 (Apr., 1993), pp. 92-106Published by: American Marketing AssociationStable URL: http://www.jstor.org/stable/1252029Accessed: 23/08/2010 18:39Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available athttp://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unlessyou have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and youmay use content in the JSTOR archive only for your personal, non-commercial use.Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained athttp://www.jstor.org/action/showPublisher?publisherCode=ama.Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printedpage of such transmission.JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range ofcontent in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new formsof scholarship. For more information about JSTOR, please contact support@jstor.org.American Marketing Association is collaborating with JSTOR to digitize, preserve and extend access to TheJournal of Marketing.http://www.jstor.org

K. Sridhar Moorthy

Theoretical Modeling in

Marketing

Over the last 10 years or so, theoretical modeling has rapidly become an important style of research in

marketing. To many people, however, this style is still a mystery. This article is an attempt at explaining

theoretical modeling. The author argues that even though theoretical modeling is quantitative, it is closer

to behavioral marketing in purpose and methodology than to quantitative decision support modeling.

Whereas behavioral marketing involves empirical experiments, theoretical modeling involves logical experiments.

Using this framework, the author addresses such issues as the internal and external validity

of theoretical models, the purpose of theoretical modeling, and the testing of model-based theories. The

agency theory explanation of salesforce compensation is used as a case study.

N essentially new style of research has sprung up

in marketing recently: mathematical theoretical

modeling.' Scarcely an issue of Marketing Science

passes without an article in this style. Some examples

are the articles by McGuire and Staelin (1983), Moorthy

(1984), Basu et al. (1985), Mahajan and Muller

(1986), Hess and Gerstner (1987), Hauser (1988),

Wilson and Norton (1989), and Rao (1990). Lately,

'In the title of the article and elsewhere, "mathematical" is dropped

and the term "theoretical modeling" is used. A theoretical model need

not be mathematical (cf. the verbal and graphic models in "behavioral

marketing": Bettman 1979; Puto 1987; Sujan 1985; Wright 1975) and

a mathematical model need not have a theoretical purpose. For example,

most mathematical models in marketing are really measurement

models-models set up to estimate demand functions (Hanssens,

Parsons, and Shultz 1990).

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theoretical modeling seems to have invaded the Journal

of Marketing Research as well (e.g., Hauser and

Wererfelt 1989; Lal 1990; Wilson, Weiss, and John

1990).

To the nonparticipant, the popularity and growth

of theoretical modeling may seem like an oddity, a

passing fad. The method seems to violate all the norms

of good research. The articles are (generally) all theory,

no data. The assumptions are unrealistic. Managerial

implications are difficult to find. To make

matters worse, the reader must wade through countless

lemmas, propositions, theorems, proofs. It is legitimate

to ask: What is all this in aid of? How does

the methodology work? Why is it useful to marketing?

How can we apply these models? How can we test

these models? How does quantitative theorizing differ

from the verbal theorizing in the "behavioral" literature

and