Toward a subjective measurement model for firm performance

Abstract

Firm performance is a relevant construct in strategic management research and frequently used as a dependent variable. Despite this relevance, there is hardly a consensus about its definition, dimensionality and measurement, what limits advances in research and understanding of the concept. This article proposes and tests a measurement model for firm performance, based on subjective indicators. The model is grounded in stakeholder theory and a review of empirical articles. Confirmatory Factor Analyses, using data from 116 Brazilian senior managers, were used to test its fit and psychometric properties. The final model had six firstorder dimensions: profitability, growth, customer satisfaction, employee satisfaction, social performance, and environmental performance. A second-order financial performance construct, influencing growth and profitability, correlated with the first-order intercorrelated, non-financial dimensions. Results suggest dimensions cannot be used interchangeably, since they represent different aspects of firm performance, and corroborate the idea that stakeholders have different demands that need to be managed independently. Researchers and practitioners may use the model to fully treat performance in empirical studies and to understand the impact of strategies on multiple performance facets.

Competitive Advantage: Mediator of Diversification and Performance

“…However, its development that relates to stakeholders is stated that corporate sustainability performance is one of way to satisfy investors, and it can be represented by profitability, its growth, and market value, all of aspects are complementary each other [24]. Corporate sustainability performance can be also measured by some dimensions of financial performance (profitability, growth, market value), and strategic performance (consumer satisfaction, employee satisfaction, environmental performance, social performance) [25]. The dimension stated is very simple which is divided into two cases, among of financial and strategy that becomes evaluation.…”

Knowledge Management Practices and Organizational Learning Have Positive Impacts on Organizational Performance of State-Owned Enterprises in Indonesia

“…In this assessment, the implementation of knowledge management is particularly not as an indicator of the SOEs performances, but the availability of knowledge in the environment of SOEs is an assessment criterion in the administrative field. Santos (2012) explained that organizational performance is a part of the strategical management field that has been managed in such a way through criteria and indicators in line with the objectives of the organization. In this case, Santos (2012) explained that at least the organizational performance can be analyzed from the perspective of financial and non-financial.…”

“…Santos (2012) explained that organizational performance is a part of the strategical management field that has been managed in such a way through criteria and indicators in line with the objectives of the organization. In this case, Santos (2012) explained that at least the organizational performance can be analyzed from the perspective of financial and non-financial. From a financial standpoint, the performance of the organization is aimed to provide information related to the achievement of income, financial growth, product value and market value, additionally the value of financial performance is also created as a responsibility toward the investors who have invested their capital in an organization.…”

“…From a financial standpoint, the performance of the organization is aimed to provide information related to the achievement of income, financial growth, product value and market value, additionally the value of financial performance is also created as a responsibility toward the investors who have invested their capital in an organization. Santos (2012) explained that there are seven indicators to measure organizational performance, namely: (1) profitability; (2) growth; (3) market value; (4) customer satisfaction; (5) employee satisfaction; (6) environmental performance; (7) social performance. Rehman, et al (2015) mentioned that the dimensions of the overall organizational performance is measured by four criteria, namely: (1) operational excellence, (2) customer intimacy, (3) product leadership, and (4) financial achievement.…”

Influence of subcontracting constraints on the performance of manufacturing industries in Nigeria

“…Despite its relevance, there is hardly a consensus about its definition, dimensionality, and measurement, what limits advances in research and understanding of the concept (Santos & Brito, 2012). The research into firm performance suffers from problems such as lack of consensus, selection of indicators based on convenience, and little consideration of its dimensionality (Combs, Crook, & Shook, 2005;Crook, Ketchen, Combs, & Todd, 2008;Richard, Devinney, Yip, and Johnson 2009).…”