The usage of balanced scorecard measures, business strategy and firm performance
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Date
2006
Authors
Jusoh, Ruzita
Journal Title
Journal ISSN
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Abstract
Sole reliance on financial or accounting based performance measures is inadequate in
the new manufacturing environment. Increase awareness of the importance of nonfinancial
performance measures in providing long-term value creation and long-term
strategic focus as well as their effects on firm performance has led to several
innovations in the area of performance measurement system. One of the widely known
innovations in this area is called balanced scorecard (BSC) which has been originated
by Kaplan and Norton in 1992. The BSC supplements the traditional financial
measures with non-financial measures focused on at least three other perspectives –
customers, internal business processes, and learning and growth. The main objective
of this study is, therefore, to investigate empirically the extent of usage of performance
measures, conceptualized as the BSC measures, within an organizational context.
Also, the objective of this study is, in part, to determine whether factors such as
perceived environmental uncertainty and firm size can act as antecedent variables to
the BSC measures and business strategy. Specifically, this study investigated the
relationship between business strategy (using Miles and Snow strategic types) and the
BSC measures usage and their main and alignment effects on firm performance.
The sample was obtained from 120 Malaysian manufacturing firms operating in
West Malaysia. The results revealed that the usage of financial measures is still high
and ranked first among the four perspectives of the BSC measures. However, the
usage of non-financial measures is gaining momentum. Also, there was indication that
firm size can be antecedent variable to the BSC measures and business strategy. The
results of the selection approach to fit provide enough evidence for the proposition that
the degree to which a firm emphasizes a given business strategy is associated with the
extent to which it uses appropriate BSC measures. Besides, there is evidence
suggesting that emphasizing prospector strategy and analyzer strategy and using
internal business process and learning and growth measures have main effects on firm
performance. The results of the interaction approach to fit only show some support for
the interactive effects of prospector strategy and BSC measures on firm performance,
while analyzer strategy and defender strategy did not. Finally, however, the results of
the systems approach indicated that an appropriate match of all four perspectives of
the BSC measures with all types of business strategies is associated with high firm
non-financial performance.
Description
PhD
Keywords
Management , Scorecard , Business strategy , Firm performance