Testing cause‐and‐effect relationships within a balanced scorecard

According to Kaplan and Norton, a fundamental tenet of the balanced scorecard (BSC) is that cause‐and‐effect relationships exist across measures within its four perspectives. However, prior research on BSCs has provided equivocal findings as to whether these relationships exist. Using a public sector BSC, we conduct a panel Granger causality analysis and find evidence of causal relationships. We highlight the importance of this finding from both a research and practice perspective.