Combining balanced scorecard with data envelopment analysis to conduct performance diagnosis for Taiwanese LED manufacturers

Abstract

Light emitting diode (LED) is a popular component to replace the traditional lighting source or advertising sign display. In 2014, high-brightness LED has a strong growth in backlight display, mobile appliances, automotive devices and outdoor illumination. However, emerging technologies in compound materials, epitaxying, packaging and new entrants result in a scale-based economy and intensively competitive environment. Inspired by the concept of business analytics, this paper proposes a novel framework to conduct corporate diagnosis for Taiwanese LED manufacturers: (1) balanced scorecard is fused with data envelopment analysis to address the impact of operational efficiency on performance outcomes, (2) financial and non-financial indicators are incorporated into the process of performance measurement, (3) the intricate causalities between key performance indicators (KPIs) and multiple outcomes (i.e. earnings per share and return on equity) are captured and (4) managerial insights are provided to indicate adaptive adjustment on significant KPIs. More importantly, a data-set comprising representative Taiwanese LED companies spanned from 2010 to 2014 is used to justify the validity of the proposed framework.

Keywords:

• feature selection
• performance prediction
• balanced scorecard
• data envelopment analysis
• corporate diagnosis

Acknowledgements

The authors want to thank two anonymous referees for offering constructive comments on improving the quality of the previous version.