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Causal Relationships in the Balanced Scorecard: A Path Analysis Approach

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  • Yael Perlman

Abstract

We use path analysis to identify causal relationships between different performance measures in each of the four perspectives defined in the balanced scorecard and examine the influence of time lag on relationships between perspectives. We analyze performance data from a real high-tech company. Our results point to a direct relationship between leading measures in the learning and growth perspective and lagging measures in the financial perspective. Our findings also support the existence of a path of ¡°Learning ¡ú Production Efficiency ¡ú Quality¡±, reflecting the fact that the more the organization invests in learning and in developing its human capital, the better the production efficiency and product quality will be in the same year. We identify an additional direct path ¡°Customer Service ¡ú Profit¡±, reflecting a significant positive relationship between the customer and profit in the same year. Finally a ¡°Growth ¡úSales¡± path exists implies that improvement in the growth of the firm is followed by a positive effect on the firm¡¯s sales one year later.

Suggested Citation

  • Yael Perlman, 2013. "Causal Relationships in the Balanced Scorecard: A Path Analysis Approach," Journal of Management and Strategy, Journal of Management and Strategy, Sciedu Press, vol. 4(1), pages 70-79, February.
    • Handle: RePEc:jfr:jms111:v:4:y:2013:i:1:p:70-79
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    References listed on IDEAS

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    Cited by:

    1. Erland Hejn Nielsen & Steen Nielsen, 2020. "Preparing students for careers using business analytics and data-driven decision making," Economics Working Papers 2020-08, Department of Economics and Business Economics, Aarhus University.
    2. Alpha Nur Setyawan Pudjono, 2024. "Examining the Causal Relationships of Balanced Scorecard Perspectives on Organizational Performance Improvement: A Case Study from the Indonesian Public Sector," GATR Journals afr232, Global Academy of Training and Research (GATR) Enterprise.
    3. Andrea Guerrini & Giulia Romano & Simone Ferretti & Donatella Fibbi & Daniele Daddi, 2016. "A Performance Measurement Tool Leading Wastewater Treatment Plants toward Economic Efficiency and Sustainability," Sustainability, MDPI, vol. 8(12), pages 1-14, November.
    4. Monica Aureliana Petcu & Maria Iulia Sobolevschi-David & Stefania Cristina Curea, 2021. "Configuration of an Integrated Quality-Social Responsibility-Performance Management System in the Hospitality Industry. Case Studies: Balneary Tourism Romania," Sustainability, MDPI, vol. 13(13), pages 1-17, June.

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