Integrating multiple criteria decision analysis and production theory for performance evaluation Framework and review

Harald Dyckhoff, Rainer Souren
2021 European Journal of Operational Research  
Accounting, life cycle assessment (LCA) and data envelopment analysis (DEA) are examples of various research areas that independently develop and apply diverse methodologies to evaluate performance. Though, many methods have in common that the results to be assessed are mainly determined by the inputs and outputs of the activities which are to be evaluated. Based on both production and decision theory, our comprehensive framework integrates and systematically distinguishes specific types of
more » ... uction-based performance assessment. It allows to examine and categorise the existing literature on such approaches. Our review focuses on sources which explicitly apply concepts or methods of multiple criteria decision analysis (MCDA). We did not find any elaborated methodology that fully integrates MCDA with production theory. At least, a basic approach to multicriteria performance analysis, which generalises the methodology of data envelopment analysis, appears to be well-grounded on production theory. It was already presented in this journal in 2001 and has rarely been noticed in the literature until now. A short overview outlines its recent insights and main findings. A key finding is that a category mistake prevails among well-known methodologies of efficiency measurement like DEA. It may imply invalid empirical results because the inputs and outputs of production processes are confused with resulting impacts destroying or creating values (to be minimised or maximised, respectively). We conclude by defining open problems and by indicating prospective research directions. Performance evaluation methods are used to assess relevant results of human activities. Such results are also called consequences, effects, im pacts, or outcomes. Methods of business administration and economics are mostly concerned with financial results on markets, or, in case of traditional cost-benefit-analysis, they measure how much individuals would pay for the results (willingness-topay). Since non-financial results are of growing importance, further methodologies have been developed to evaluate environmental and social aspects of performance, too. Their approaches may ✩ This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.
doi:10.1016/j.ejor.2021.05.046 fatcat:3ajrbw5mmzhf3pbjknvfy7am7m