StudentShare solutions
Triangle menu

Firm Performance - Essay Example

Extract of sample
Firm Performance

Arguments for and against are presented to make the reader aware of the issues surrounding the topic. In the end, a synthesis shall be made of the ideas presented and a conclusion on whether firm performance is indeed path dependent or not is made.
Firm performance is at the very heart of business management because it is the time test of any business strategy and theories. Nonetheless, there is little consensus on how to best measure the construct. Researchers and experts with strong finance or economic background use the term to refer to how efficient the firm utilizes its assets in generating profits. While this is certainly an appealing definition, it can be considered to be too narrow the reason being that it disregards the social performance of the firm. This definition only focuses on the financial part whereas firm performance can also be related to how happy its employees, suppliers and customers with its services. In this paper, I will be holding a stakeholder's perspective and consider firm performance as a combination of financial and social performance. To illustrate this construct further, I will be using the model developed by North (1990) as shown in Figure 1:
The reason for our choice of defining firm performance as a function of financial and social constructs is that both have an effect on the other. Consider for example that to reduce costs and increase returns, a firm wishes to outsource. While the firm can improve financially, it can suffer socially due to employee morale decline and customer dissatisfaction. We can see this already happening with business entities with Chinese-sourced products. Enhancing employee satisfaction and job security may increase the social performance of the firm but it can also corrode its financial standing. Thus, we need to consider both as necessary constructs in understanding firm performance. This definition will prove to be invaluable in analyzing whether firms are indeed path dependent or not.

Defining Path Dependence
There is much academic and scholarly words discussing the theory of Path Dependency but to make it easier to understand, I will be using a hiking analogy to describe the concept. When a person goes hiking, steps and turns taken in the beginning or in the course of the travel will ultimately define its present status. For example, a wrong turn could lead a person getting lost or ending up in a wrong checkpoint. A small decision could provide good or severe consequences in the outcome of the hiking experience. Following this analogy, Path Dependency argues that small, even inconsequential and random events at the beginning or in the course of the path can define the options and decisions available at the present state of affairs (Pierson, 2000).
Firm Resources and Path Dependency
In the 1980's, there was a view stating that the performance of firms can only be understood thru an analysis of resources and mobility independent of particular historical events and other idiosyncratic attributes (Levin et al 1987). However, the importance of the path-dependent theory has since been recognized. In this section, the path-dependency of firm performance is explored through the analysis of firm ...Show more


Strategic management involves the determination of the ways and means of how the firm can perform well. Those who pursue the field are interested in being able to understand what makes a firm succeed in the market. One theory that seeks to address the issue is that of Path Dependency which states that 'history matters'…
Author : sporerchelsea
Firm Performance essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Firm Performance"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

The effects of retail channel integration through the use of information technologies on Firm performance
It is evident that firms that have been vertically integrated through information technology are bound to experience low uncertainty regarding its flow of production. This is due to the strong structure of the association. However, it faces issues with flexibility on the side of production given the involvement of many units that are affected due to modifications effected to comply with technology.
6 pages (1500 words) Essay
Impact of trade unions on firm performance
Trade unions negotiate with employers on behalf of their members. The significance of the organizations comes in when employees fail to reach a consensus about these issues with the employees. This is because these organizations usually have more bargaining power than an individual worker.
10 pages (2500 words) Essay
Influence of Mergers on Firm Performance
Merging firms increase the resource base of the resultant company thereby boosting growth without necessarily developing another unit. The process of mergers is usually long and complicated, depending on various factors that influence the outcome, which may be a success or failure.
6 pages (1500 words) Essay
Employee satisfaction and firm performance
Heskett, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser, Jr. and Leonard A. Schlesinger, and published in Harvard Business Review. The authors are members of the faculty of Harvard Business School and they work in group of service management. It is known, that there are many studies, articles and research devoted to customer satisfaction, but the writings, theories and strategies related to employee satisfaction with job are few.
12 pages (3000 words) Essay
(a research proposal ) Employee satisfaction and firm performance
Heskett, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser, Jr. and Leonard A. Schlesinger, and published in Harvard Business Review. The authors are members of the faculty of Harvard Business School and they work in group of service management. It is known, that
12 pages (3000 words) Essay
The Effects of Entrepreneurial Orientation on Firm Performance
It has been said that in order to be effective, one must be affective. This has important implications for the modern day organisation which
12 pages (3000 words) Essay
Discuss the different issues related to IT-enhanced firm performance
IT can enhance firm performance but much depends upon the right investment and the right training that is given to the users of technology. Those that have invested in information technology
10 pages (2500 words) Essay
Firm Performance: Path Dependent
Path Dependency which states that ‘history matters’. This theory basically states that small events in the beginning of a path can define outcomes in the present.
7 pages (1750 words) Essay
Ownership structure and Firm performance: evidence from GCC countries
Ordinary least square (OLS) with fixed effects panel models are employed. The analysis is done using two measures of performance including return on assets (ROA) and Tobin’s Q. The impact of firm specific variables such
2 pages (500 words) Essay
It is important in providing an understanding of HRM history in Malaysia including the current human resource (HR) practices in the country. The research also serves to examine the extent of proper
4 pages (1000 words) Essay
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Click to create a comment
Contact Us