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1. Introduction
Performance measurement plays a key role in developing, implementing and monitoring a strategic plan. It enables managers to evaluate whether organizational objectives have been achieved, and is further used to develop and compensate managers. It helps managers monitor whether the company is moving in the direction they want it to go. However, to the authors' knowledge there has been no study on the relationship between competitive strategy, performance measurement, and firm performance. In particular, no relevant evidence exists in Thailand.
Literature review of existing studies shows that there are different performance measurement systems ([10] Chenhall and Langfield-Smith, 1998). Thus, it is important to ask what the most appropriate performance measures are which should be aligned to competitive strategy. Managers still face the issue of effective performance measurement, and may be overwhelmed with performance data ([32] Maltz et al. , 2003; [35] Moullin, 2007). In this paper, we argue that a competitive strategy can help a firm achieve its competitive advantage only when appropriate performance measurement is used and that a good fit between the competitive strategy and performance measurement will lead to higher firm performance.
This study examines the relationship between competitive strategy and firm performance as well as the mediating role of performance measurement. Previous studies only analyze the indirect effect of performance measurement on the relationship between differentiation strategy and firm performance ([50] Spencer et al. , 2009). Our study adds to the existing theoretical discussion and analyses by investigating specifically the mediating effect of performance measurement on the relationship between two main types of strategies proposed in Porter's model, namely, cost leadership and differentiation strategies, and firm performance through performance measurement.
We develop a theoretical framework that hypothesizes the mediating effect of performance measurement on the relationship between competitive strategy and firm performance. This paper aims to contribute to a better understanding on which characteristics of performance measurement are appropriate to each type of competitive strategy proposed in Porter's model. It also aims to investigate the impact of such performance measurement on firm performance in the context of Thai industries. In addition, we offer managerial implications with respect to choosing appropriate performance measurements to align with formulated competitive strategy in order to enhance firm performance. It is our assertion that...