A Note on the Dimensionality of the Firm Financial Performance Construct Using Accounting, Market, and Subjective Measures

Abstract

Most research in strategic management operationalizes firm financial performance by using either accountingor market-based measures. Recently, some have suggested that subjective measures may be useful in assessing a firm's jitiancial performance. We argue that there is a theoretical basis f o r viewiiig firm jinancial performance as having a higher order structure consisting of three separate yet distinct dinzensions. Using second-order coiijirniatoiy factor analysis, we found that while differences exist among accounting, market, and subjective measures of firm jitiancial performance, there is evidence to support the concept of a single utiderlying coiistruct. While our findings are statistica1l)l sigtiijicatit arid thus support our hypotheses, the substantive nature of our results suggests that much more research is needed before we fully uriderstarid the dinierisioiiality of firm financial perforniaiice.

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