The Relationship of Environmental Hostility, Use of Performance Measurement Systems, Empowerment, and Business Performance

[Purpose]This study investigates the relationship of environmental hostility, use of performance measurement systems (PMS), empowerment, and business performance by suggesting effectiveness of feedback and feedforward use of PMS. [Methodology]By using survey data collected from 110 large Korean companies in manufacturing, constructing, retail industries, this study analyzes proposing relationships with partial least squares (PLS) structural equation approach. [Findings]The result shows the positive effect of environmental hostility to use of PMS. Also, use of PMS appear to affect different dimensions of empowerment；feedback use of PMS is positively associated with potency and influence while feedforward use of PMS has positive relation only with meaning. Empowerment positively affects business performance；particularly, potency is positively related to both aspects of performance while meaning is related to non－financial performance only. [Implications]Overall, as firms face fierce market competition, they try to use PMS more than before. It indicates that environmental hostility emphasizes the necessity of PMS. A more intense use of PMS leads to improve perceived empowerment of business unit in some way；thereby, encouraged empowerment is able to improve business performance. Hence, firms tend to use PMS more in both feedback and feedforward way under hostile environment, which ultimately contributes to improving performance through increased empowerment.