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Multi-criteria production theory: foundation of non-financial and sustainability performance evaluation

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  • Harald Dyckhoff

    (RWTH Aachen University)

Abstract

Multi-criteria production theory (MCPT) is a generalization of traditional production theories which has been developed in order to integrate concerns of modern management science and economics, in particular sustainability and environmental protection. Such as traditional production theory lays a foundation for cost (and revenue) theory, MCPT can be utilized to expand the knowledge regarding the theory and practice of non-financial performance evaluation, which is of major importance with distinct, conflicting objectives. Based on decision theory, the main idea behind MCPT is the capability to distinguish technologically determined inputs and outputs of a production system’s activity from its desired or undesired impacts on (artificial or natural) environments. The idea is formalized by multiple value functions. The paper clarifies the basic assumptions of MCPT in comparison to those of traditional production theories. For the special cases of linear and of monotonic value functions, two main theorems of MCPT are proven. Their application provides fruitful insights into some procedures and pitfalls of non-financial performance evaluation, especially those regarding ecological economics and data envelopment analysis. The main topics that are discussed address undesirable products and factors, hierarchies of performance evaluations, problems of non-monotonic value functions as well as the rationality of ‘technically inefficient’ production.

Suggested Citation

  • Harald Dyckhoff, 2018. "Multi-criteria production theory: foundation of non-financial and sustainability performance evaluation," Journal of Business Economics, Springer, vol. 88(7), pages 851-882, September.
    • Handle: RePEc:spr:jbecon:v:88:y:2018:i:7:d:10.1007_s11573-017-0885-1
    DOI: 10.1007/s11573-017-0885-1
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    Cited by:

    1. Dyckhoff, Harald & Souren, Rainer, 2022. "Integrating multiple criteria decision analysis and production theory for performance evaluation: Framework and review," European Journal of Operational Research, Elsevier, vol. 297(3), pages 795-816.
    2. Trinks, Arjan & Mulder, Machiel & Scholtens, Bert, 2020. "An Efficiency Perspective on Carbon Emissions and Financial Performance," Ecological Economics, Elsevier, vol. 175(C).
    3. Victoria Wojcik & Harald Dyckhoff & Marcel Clermont, 2019. "Is data envelopment analysis a suitable tool for performance measurement and benchmarking in non-production contexts?," Business Research, Springer;German Academic Association for Business Research, vol. 12(2), pages 559-595, December.
    4. Malte L. Peters & Stephan Zelewski, 2021. "Upper and lower satisficing levels in efficiency analysis: a corporate social responsibility perspective," Sustainability Nexus Forum, Springer, vol. 29(3), pages 187-195, December.
    5. Debdip Khan & Ranjan Kumar Gupta, 2024. "Production optimization with the maintenance of environmental sustainability based on multi-criteria decision analysis," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(8), pages 19425-19442, August.
    6. Heinz Ahn & Marcel Clermont & Julia Langner, 2022. "The impact of selected input and output factors on measuring research efficiency of university research fields: insights from a purpose-, field-, and method-specific perspective," Journal of Business Economics, Springer, vol. 92(8), pages 1303-1335, October.
    7. Harald Dyckhoff, 2019. "Multi-criteria production theory: convexity propositions and reasonable axioms," Journal of Business Economics, Springer, vol. 89(6), pages 719-735, August.

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    More about this item

    Keywords

    Data envelopment analysis; Ecological economics; Multi-criteria decision making; Non-financial performance measurement; Production theory; Sustainability;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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