Testing cause-and-effect relationships within a balanced scorecard

According to Kaplan and Norton, a fundamental tenet of the balanced scorecard (BSC) is that cause-and-effect relationships exist across measures within its four perspectives. However, prior research on BSCs has provided equivocal findings as to whether these relationships exist. Using a public sector BSC, we conduct a panel Granger causality analysis and find evidence of causal relationships. We highlight the importance of this finding from both a research and practice perspective.