The Frontier of Performance

Abstract

The measurement of performance is critical to nearly all managerial disciplines. Yet, we know little about the aggregation characteristics of the components of performance and how our notion of a "good performing firm" relates to what it is that we use as a dependent variable. In this paper, we propose an approach to thinking about the measurement of performance that uses the logic of frontier analysis. The approach is shown to be a reasonable representation of the multidimensional nature of performance and is shown to replicate, effectively, the components that we normally consider when discussing performance. This approach is shown to be superior to the simpler alternatives based on psychometric techniques.

Keywords: Performance, Frontier Analysis

JEL Classification: M00, M21, L10