A Comparison of Strategies for Forming Product Indicators for Unequal Numbers of Items in Structural Equation Models of Latent Interactions

This Monte Carlo simulation study investigated different strategies for forming product indicators for the unconstrained approach in analyzing latent interaction models when the exogenous factors are measured by unequal numbers of indicators under both normal and nonnormal conditions. Product indicators were created by (a) multiplying parcels of the larger scale by items of the smaller scale, and (b) matching items according to reliability to create several product indicators, ignoring those items with lower reliability. Two scaling approaches were compared where parceling was not involved: (a) fixing the factor variances, and (b) fixing 1 loading to 1 for each factor. The unconstrained approach was compared with the latent moderated structural equations (LMS) approach. Results showed that under normal conditions, the LMS approach was preferred because the biases of its interaction estimates and associated standard errors were generally smaller, and its power was higher than that of the unconstrained approach. Under nonnormal conditions, however, the unconstrained approach was generally more robust than the LMS approach. It is recommended to form product indicators by using items with higher reliability (rather than parceling) in the matching and then to specify the model by fixing 1 loading of each factor to unity when adopting the unconstrained approach.