Answers to issues can be found either by the process of deduction or the process of induction, or by a combination of the two. Deduction is the process by which we arrive at a reasoned conclusions by logically generalized from a known fact. For example, we know that all high performers are highly proficient in their jobs. If jobs is high performer, we then conclude that he is highly proficient in doing his job. Induction, on the other hand, is a process where observe certain phenomena and on this arrive at conclusions. In other words, in induction we logically establish a general proposition based on observed facts. For instance, we see that the production processes are the prime features of factories or manufacturing plants. We therefore conclude that factories exist for production purposes. Both the deductive and the inductive processes are applied in scientific investigations.

Theories based on deduction and induction help us to understand, explain or predict business phenomena. When research is designed to test some specific hypothesized outcomes, as for instance, to see if controlling aversive noise in the environment increase the performance of individuals in solving mental puzzles, the following steps ensue. The investigator begins with the theory that noise adversely affects mental problem solving. The hypothesis is then generated that if the noise is controlled, mental puzzles can be solved more quickly and correctly. Based on this, a research project is designed to test the hypothesis. The results of the study help the researcher to deduce or conclude that controlling the aversive noise does indeed help the participants to improve their performance no mental puzzles. This method of starting with a theoretical framework, formulating hypothesis, and logically deducing form the results of the study is known as the hypothetico – deductive method.