Discuss the differences in approach based on inductive versus deductive reasoning.
DNP 815 Week 2 Discussion Question Two

Define the process of theory building. Discuss the differences in approach based on inductive versus deductive reasoning. Describe how you would build and test theory in your practice area.

The building of theory occurs in two major stages – the descriptive stage and the
normative stage. Within each of these stages, theory builders proceed through three steps. The
the theory-building process iterates through these stages again and again.1
In the past,
management researchers have quite carelessly applied the term theory to research activities that
pertain to only one of these steps. Terms such “utility theory” in economics, and “contingency
theory” in organization design, for example, actually refer only to an individual stage in the

DNP 815 Week 2 Discussion Question Two
DNP 815 Week 2 Discussion Question Two

theory-building process in their respective fields. We propose that it is more useful to think of the
term “theory” as a body of understanding that researchers build cumulatively as they work
through each of the three steps in the descriptive and normative stages. In many ways, the term
“theory” might better be framed as a verb, as much as it is a noun – because the body of
understanding is continuously changing as scholars who follow this process work to improve it.

The Building of Descriptive Theory
The descriptive stage of theory building ia a preliminary stage because researchers must
pass through it in order to develop normative theory. Researchers who are building descriptive
theory proceed through three steps: observation, categorization, and association.

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Step 1: Observation
In the first step researchers observe phenomena and carefully describe and measure what
they see. Careful observation, documentation and measurement of the phenomena in words and
numbers is important at this stage because if subsequent researchers cannot agree upon the
descriptions of phenomena, then improving theory will prove difficult. Early management
research such as The Functions of the Executive (Barnard, 1939) and Harvard Business School
cases written in the 1940s and 50s was primarily descriptive work of this genre – and was very
valuable. This stage of research is depicted in Figure 1 as the base of a pyramid because it is a
necessary foundation for the work that follows. The phenomena being explored in this stage
includes not just things such as people, organizations and technologies, but processes as well.
Without insightful description to subsequently build upon, researchers can find themselves
optimizing misleading concepts. As an example: For years, many scholars of inventory policy
and supply chain systems used the tools of operations research to derive ever-more-sophisticated
optimizing algorithms for inventory replenishment.

Most were based on an assumption that
managers know what their levels of inventory are. Ananth Raman’s pathbreaking research of the
phenomena, however, obviated much of this research when he showed that most firms’
computerized inventory records were broadly inaccurate – even when they used state-of-the-art
automated tracking systems (Raman 199X). He and his colleagues have carefully described how
inventory replenishment systems work, and what variables affect the accuracy of those processes.
Having laid this foundation, supply chain scholars have now begun to build a body of theories and
policies that reflect the real and different situations that managers and companies face.

1
This model is a synthesis of models that have been developed by scholars of this process in a range of fields and
scholars: Kuhn (1962) and Popper (1959) in the natural sciences; Kaplan (1964), Stinchcombe (1968), Roethlisberger
(1977) Simon (1976), Kaplan (1986), Weick (1989),Eisenhardt (1989) and Van de Ven (2000) in the social sciences.
3
Researchers in this step often develop abstractions from the messy detail of phenomena
that we term constructs. Constructs help us understand and visualize what the phenomena are,
and how they operate. Joseph Bower’s Managing the Resource Allocation Process (1970) is an
outstanding example of this. His constructs of impetus and context, explaining how momentum
builds behind certain investment proposals and fails to coalesce behind others, have helped a
generation of policy and strategy researchers understand how strategic investment decisions get
made. Economists’ concepts of “utility” and “transactions cost” are constructs – abstractions
developed to help us understand a class of phenomena they have observed. We would not label
the constructs of utility and transactions cost as theories, however. They are part of theories –
building blocks upon which bodies of understanding about consumer behavior and organizational
interaction have been built.

Step 2: Classification
With the phenomena observed and described, researchers in the second stage then classify
the phenomena into categories. In the descriptive stage of theory building, the classification
schemes that scholars propose typically are defined by the attributes of the phenomena.
Diversified vs. focused firms, and vertically integrated vs. specialist firms are categorization
examples from the study of strategy. Publicly traded vs. privately held companies is a
categorization scheme often used in research on financial performance. Such categorization
schemes attempt to simplify and organize the world in ways that highlight possibly consequential
relationships between the phenomena and the outcomes of interest.
Management researchers often refer to these descriptive categorization schemes as
frameworks or typologies. Burgelman (1986), for example, built upon Bower’s (1970) construct
of context by identifying two different types of context – organizational and strategic.
Step 3: Defining Relationships
In the third step, researchers explore the association between the category-defining
attributes and the outcomes observed. In the stage of descriptive theory building, researchers
recognize and make explicit what differences in attributes, and differences in the magnitude of
those attributes, correlate most strongly with the patterns in the outcomes of interest. Techniques
such as regression analysis typically are useful in defining these correlations. Often we refer to
the output of studies at this step as models.

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