Validating Business Simulations: Does High Product Quality Lead to High Profitability?

Abstract

Among the nine major strategic influences on profitability reported as part of the ongoing stream of PIMS research is that a business firm’s product quality has a strong positive impact on all measures of financial performance. This finding is based on an examination of the performance history of over 3,800 companies contributing data on a yearly basis to the Strategic Planning Institute. A major concern of simulation users through the years is how realistic are business simulation games. Numerous validation studies on business simulations have examined game validity. The product quality and profitability levels of 451 product-based SBUs from 152 different simulation companies competing in 33 industries within a business simulation game were examined. It was found that product quality and profitability levels as measured by ROI were significantly and strongly positively correlated (.576) as suggested by the PIMS findings.