I had interesting conversations with two colleagues; independently but about the same student. We chatted about how some students just touch the surface in their description of survey instruments (among other things), while others will dig deep to demonstrate thoroughness and thoughtfulness.
The student in question cited Campbell and Park (2017) as the source of a subjective-based measure to assess company (firm) performance. There was no discussion in the student’s study about the use of a subjective-based vs objective-based instrument; only that the instrument used in the study had a Cronbach’s alpha (α) of .87. That was it!
I have found that privately-held companies don’t like to share financial information with researchers. Thus, if a student goes down a path of surveying these type of businesses to collect objective data (e.g,. sales, gross margin), I advise them they can expect to have a higher non-response rate than anticipated, potentially a larger number of items not answered, and should plan ($$$) to obtain a larger sample.
I had two questions: –
Where did the use of subjective-based instruments to measure firm performance begin?
Are subjective-based instruments just as valid as objective-based instruments?
I couldn’t ask the student these questions, since he didn’t discuss it in his proposal. He probably doesn’t know. So, I started reading…starting with Campbell and Park (2017). Campbell and Park cited Campbell et al. (2011) and Runyan et al. (2008) on p. 305. Those references led to me to Frazier (2000), Niehm (2002), Droge et al. (2004), Runyan et al. (2006), Richard et al. (2009), and (most importantly) Venkatraman and Ramanujam (1986). Let’s start there…
Venkatraman and Ramanujam (1986) explored ten different approaches to measuring business performance. They posited that business performance has two dimensions: financial v operational, and primary data sources v secondary data sources. Relating to this student’s study, the second dimension was of interest. Venkatraman and Ramanujam discussed the benefits and limitations of using primary and secondary data as a measure of business performance (p. 808). More importantly, they discussed the use of financial data from secondary sources and operational data from primary sources to “enlarge the conceptualization of business performance” (p. 811). For example, a gross margin of 65% could be conceptualized as doing better or worse than the competition. Makes sense…but where was this type of instrument used first?
Frazier (2000), citing Venkatraman and Ramanujam, wrote “subjective assessments of performance are generally consistent with secondary performance measures” (p. 53). Frazier appears to have created a three-item instrument to measure firm performance. The three items, measured on a 5-point Likert scale from poor (1) to excellent (5), were –
- How would you describe the overall performance of your store(s) last year?
- How would you describe your performance relative to your major competitors?
- How would you describe your performance relative to other stores like yours in the industry?
Frazier reported an α = .84 (N = 112). Niehm (2002), using a similarly worded instrument reported an α = .82 (N = 569). Runyan et al. (2008), citing Frazier (2000) and Niehm (2002), used the same instrument and reported an α = .82 (N = 267). However, what’s important to note is that Runyan et al. discussed an advantage that subjective questions have over objective questions – increased response rates – citing a study of one of the co-authors (Droge et al., 2004). Runyan et al. (2008) and Campbell et al. (2011) followed similar approaches and both reported an α = .87 (which could be an editorial error as the wording is similar). Campbell et al. (2011) also incorporated research performed by Richard et al. (2009) where the authors posit that the context of the study should dictate whether to use subjective or objective measures.
What did I learn in 2-3 hours of reading and writing –
- Subjective-based instruments appear to similar in validity as objective-based instruments, but we (researchers) should periodically confirm by issuing both and examine construct validity.
- A subjective instrument could reduce non-response rates, which is always an issue in research and incredibly important in today’s COVID-19 world as companies and people appear to over-surveyed and not responsive.
- The three-item subjective-based instrument developed by Frazier (2000) appears to be reliable in test-retest situations
I also reflected on typical responses from students when asked about their instrument –
- Superficial Student – “This person used it. Why can’t I?”
- Thorough Student – “What would you like to know?”
Campbell, J. M., Line, N., Runyan, R. C., & Swinney, J. L. (2010). The moderating effect of family-ownership on firm performance: An examination of entrepreneurial orientation and social capital. Journal of Small Business Strategy, 21(2), 27-46.
Campbell, J. M., & Park, J. (2017). Extending the resource-based view: Effects of strategic orientation toward community on small business practice. Journal of Retailing and Consumer Services, 34(1), 302-308. https://doi.org/10.1016/j.jretconser.2016.01.013
Droge, C., Jayaram, J., & Vickery, S. K. (2004). The effects of internal versus external integration practices on time-based performance and overall performance. Journal of Operations Management, 22(6), 557-573. https://doi.org/10.1016/j.jom.2004.08.001
Frazier, B. J. (2000). The influence of network characteristics on information access, marketing competence, and perceptions of performance in small, rural businesses (Doctoral dissertation: Michigan State University).
Niehm, L. S. (2002). Retail superpreneurs and their influence on small communities (Doctoral dissertation: Michigan State University).
Richard, P., Devinney, T., Yip, G., & Johnson, G. (2009). Measuring organizational performance: Towards methodological best practice. Journal of Management, 35(3), 718-804. https://doi.org/10.1177/0149206308330560
Runyan, R., Droge, C., & Swinney, J. (2008). Entrepreneurial orientation versus small business orientation: What are their relationships to firm performance. Journal of Small Business Management, 46(4), 567-588. https://doi.org/10.1111/j.1540-627x.2008.00257.x
Runyan, R. Huddleston, P., & Swinney, J. (2006). Entrepreneurial orientation and social capital as small firm strategies: A study of gender differences from a resource-based view. The International Entrepreneurship and Management Journal, 2(4), 455-477. https://doi.org/10.1007/s11365-006-0010-3
Venkatraman, N., & Ramanujum, V. (1986). Measurement of business performance in strategy research: A comparison of approaches. Academy of Management Review, 11(4), 801-814. https://doi.org/10.2307/258398