TAF PUBLISHING

Resource based theory describes, explains and predicts how ϐirms can achieve sustainable competitive advantages through acquisition and control over resources. This study examines the role of Performance Measurement Systems’ (PMS) usage either diagnostically or interactively in further enhancing hospitals’ performance in managing their strategic resources. PMS acts as tools for measuring ϐirms’ performance through monitoring, controlling and legitimizing company resources, and is viewed as learning devices to enhance ϐirms’ performance. Using diagnostic PMS, the managers can control and monitor the resources based on pre-set standard performance, while interactive PMS provides feedback through frequent communication and observes new strategies that enhance the strategic resources’ performance which leads to ϐirms’ performance. Data were collected from 160 hospitals in Sumatra Island and Jakarta using structured questionnaire. The result of path analysis using AMOS 18 reveals that alternative model is a ϐit model than a based model. The ϐindings show that strategic resources of Indonesian hospitals (human resource, structural resource and physical resource) should be managed independently. PMS is used diagnostically or dynamically (combination of diagnostic and interactive ways) in managing each of the resources to enhance the quality of healthcare services and subsequently lead to ϐinancial performance of the hospital.