A Comparison of Qualitative and Quantitative Firm Performance Measures

Produced as MED Occasional Paper 08-04 for the Ministry of Economic Development

Many analyses of firm performance are based upon self-reported measures. However, not only are these likely to be more subject to general reporting error than alternative official sources, but also measures of relative performance may be subject to the biases observed in the psychology literature.

In this paper we consider both absolute and relative performance, reported in the Business Operations Survey (BOS), with alternative measures taken from administrative sources, brought together under the Improved Business Understanding via Longitudinal Database Development (IBULDD) project in the prototype Longitudinal Business Database (LBD).

Our results suggest that there is much commonality in the picture we see using either administrative (tax) or quantitative survey data, giving us some comfort that the tax data, while not collected for statistical purposes, serves as well as a tool for measuring firm performance. However, there are many differences also, in particular when we consider reported profits.