Theory formulation happens in 2 key stages: descriptive; and normative, with each stage having 3 steps. Terminologies like utility hypothesis within economics, plus contingency hypothesis within the systemization of plans, for instance, really refer merely to a particular stage within the process of developing theories. The explanatory phase of hypothesis formulation entails a preliminary stage since researchers usually initially traverse it before developing superior normative theories. When developing descriptive hypotheses, researchers use steps like: observation; association; and categorization.
Regarding observation, researchers monitor occurrences and cautiously define and measure their observations. Careful scrutiny, recording, plus measurement of occurrences is vital because succeeding researchers rely on such data to improve theories. Explored phenomena include people, technologies, organizations, and processes. Such observation may be carried out any stage from scrutiny of larger databases to field ethnographic observation (Carlile, 2005)
Classification entails the classification of occurrences into classes. Usually proposed classification structures are described by characters of the occurrences. Examples of categorization structures from the examination of policy include: focused versus diversified firms; and specialist versus vertically integrated firms. Privately-held firms versus publicly-traded firms are classification structures usually employed in fiscal performance research. These classification structures try to organize and simplify the globe in modes that stress possibly significant linkages between the occurrence and significant results.
Pertaining to describing relationships, researchers study the link between the class-defining characters and obswe5rved outcomes. The Descriptive hypothesis formulation stage involves researchers analyzing and publicly announcing the disparities in characters and the disparities in the amount of such characters that are strongly linked to the sequences within the studied outcomes.
Descriptive hypothesis which enumerates the extend of association between the class-describing characters of the occurrences and the studied results can generally make hypothetical statements regarding the relationship representing mean average inclinations (Carlile, 2005).
Carlile, P. R. (January 6th 2005). The cycles of theory building in management research. Retrieved July 16th 2009, from http://docs.google.com/gview?a=v&q=cache:L0cRuuFWiS8J:www.innosight.com/documents/Theory%2520Building.pdf+research+and+management+theory%3F&hl=en&gl=ke