TY - CONF

T1 - A measurement model of firm performance

AU - Santos, Juliana

AU - Brito, Luis

PY - 2009

Y1 - 2009

N2 - Firm performance is one of the most important concepts of business strategy. Regardless of its importance and ubiquitous use, there is no consensus about its precise definition and dimensionality, limiting theory advance. To contribute to the theme, this paper investigated the dimensionality of firm performance. Drawing on stakeholder theory, a firm is so efficient as its ability to respond to its stakeholder’s requirements. Seven performance aspects were mapped on the literature: profitability, growth, market value, customer satisfaction, employee satisfaction, environmental performance and social performance. Using data collected through a survey with 111 senior managers and board members, alternative dimensional structures of first and second order factors were tested with Confirmatory Factor Analysis. Our results indicated six first-order dimensions and the existence of a financial performance as a second-order dimension. Understanding the dimensionality of this construct allows the researcher to make a better judgment about which indicators to include or leave out, and the potential consequences of these choices. A clearer conceptual model of performance as a multidimensional construct is also useful for managers, whose decisions and courses of action can have different impacts on each of these dimensions.

AB - Firm performance is one of the most important concepts of business strategy. Regardless of its importance and ubiquitous use, there is no consensus about its precise definition and dimensionality, limiting theory advance. To contribute to the theme, this paper investigated the dimensionality of firm performance. Drawing on stakeholder theory, a firm is so efficient as its ability to respond to its stakeholder’s requirements. Seven performance aspects were mapped on the literature: profitability, growth, market value, customer satisfaction, employee satisfaction, environmental performance and social performance. Using data collected through a survey with 111 senior managers and board members, alternative dimensional structures of first and second order factors were tested with Confirmatory Factor Analysis. Our results indicated six first-order dimensions and the existence of a financial performance as a second-order dimension. Understanding the dimensionality of this construct allows the researcher to make a better judgment about which indicators to include or leave out, and the potential consequences of these choices. A clearer conceptual model of performance as a multidimensional construct is also useful for managers, whose decisions and courses of action can have different impacts on each of these dimensions.

KW - Firm Performance

KW - Confirmatory factor analysis

KW - Subjective Performance Indicators

M3 - Conference paper

T2 - The 29th SMS Annual International Conference

Y2 - 11 October 2009 through 14 October 2009

ER -