How the Balanced Scorecard Helps Improve Business Performance and Gain Sustainable Competitive Advantage

Abstract

When a firm sustains profits that exceed the average for its industry, the firm is said to possess a competitive advantage over its rivals. So, why do some companies outperform others? This question has been intensely debated by strategic management researchers over the last decades. Several authors point out three broad explanations: (1) the mistakes made by some firms create advantages to others; (2) firms that exploit market power gain advantages over others; (3) firms with special capabilities gain advantages over others. Competitive advantage is recognised as being the major cause for explaining top organizational performance and is a fundamental goal of academic strategic management studies. More recently, the research focus goes to an expanded view of the concept, the sustainable competitive advantage (SCA), highlighting the idea that some forms of competitive advantage are very difficult to imitate and can therefore lead to persistent superior economic performance. This article aims to show how a Balanced Scorecard (BSC) can contribute to achieve SCA. It also collects a set of useful information related to several areas that have used this framework as a support to improve the performance of their organizations. Researchers, managers and practitioners recognize the virtues and potentialities of the BSC concept, although some critiques are also referenced.