Simultaneous Estimation of Indirect and Interaction Effects using Structural Equation Models Joan Manuel Batista-Foguet, Germa Coenders, Willem E. Saris, and Josep Bisbe Abstract Interaction effects are usually modeled by means of moderated regression analysis. Structural equation models with non-linear constraints make it possible to estimate interaction effects while correcting for measurement error. From the various specifications, Joreskog and Yang's (1996, 1998), likely the most parsimonious, has been chosen and further simplified. Up to now, only direct effects have been specified, thus wasting much of the capability of the structural equation approach. This paper presents and discusses an extension of Joreskog and Yang's specification that can handle direct, indirect and interaction effects simultaneously. The model is illustrated by a study of the effects of an interactive style of use of budgets on both company innovation and performance. |