Organizational performance as a set of four dimensions: An empirical analysis

Organizational performance (OP) is a central construct in strategic management research. While previous studies established the multidimensionality of OP, relationships between OP and its dimensions remain unexplored. It is important to specify these relationships to determine how to measure OP and how to interpret empirical results. We apply confirmatory tetrad analysis and the framework of Edwards (2001) to test our hypotheses regarding the multidimensional construct type of OP based on a large sample of listed U.S. organizations. Our results suggest that OP is best modeled as a set of four related dimensions (i.e., profitability, liquidity, growth, and stock market performance). Our study has far-reaching implications for future research by showing that hypotheses concerning antecedents or consequences of OP should be developed at the dimensional level.