MEASURING FIRM PERFORMANCE IN A WAY THAT IS CONSISTENT WITH STRATEGIC MANAGEMENT THEORY

Much empirical work in strategic management adopts measures of firm performance originally developed in accounting and finance. Not surprisingly, these measures are based on theories of how firms create value developed in these two disciplines. Strategic management has developed a different theory of how firms create value that focuses on assembling resources from multiple stakeholders, some of whom may be outside the boundaries of a firm. Progress in empirical research in strategic management will require the development of a measure of firm performance that adopts this stakeholder perspective.