Measurement of Business Performance in Strategy Research: A Comparison of Approaches

Explores the different manners in which business performance can be measured in strategy research. A four-celled classification scheme, which depicts ten approaches for measuring business performance, is developed to aid in this analysis. The first dimension of this classification depicts financial versus operational indicators while the second depicts primary data sources versus secondary data sources. The ten approaches are viewed as either within-cell or across-cell. The benefits and limitations of each approach are presented, with reference to previous studies using each performance measure. The within-cell approaches are found to have a narrow perspective on business performance and are not recommended for use. In cases where a within-cell approach is the only possibility, one must pay special attention to the methodological issues. This classification scheme results in several important implications for operationalizing business performance. Since the measurement approaches proposed in this analysis increase the domain of business performance, future researchers must recognize and address the dimensionality issue that results. Further, researchers must consider the convergence across the differing methods of data collection. (SRD)