Item Response Theory and Construct Measurement in Emerging Markets

Purpose – The purpose is to present item response theory (IRT) as a promising approach to deal with theoretical and methodological challenges which may not be adequately addressed with linear factor analysis (LFA) techniques. Approach – We address this limitations and present IRT's approach to counteracting these difficulties. We further present two IRT models in greater detail and make a theoretical comparison between these models and LFA techniques. Then, we illustrate how IRT is applied in practice by analyzing a scale of trust by an IRT and an LFA approach and comparing their results. Practical implications – Scale properties may vary among countries because some items may function differently in different contexts. Moreover, a scale's reliability depends on the value of the latent variable being assessed, which implies that the scale may discriminate better among certain ranges of the latent trait than among others. The theory we hereby present offers a more adequate approach to dealing with these issues than extant LFA methods. Originality/value – This chapter presents a methodology of recognized value in other fields of knowledge into the field of strategy and international business, thereby advancing the methodologies available for doing research in these domains.