An Empirical Critique of In Search of Excellence: How Excellent are the Excellent Companies?

This article examines the research methods used by Peters and Waterman in their book, In Search of Excellence (1982), and describes the results of empirical tests done to assess whether their exemplary firms are actually excellent. Peters and Waterman's "excellent" firms were compared with 1,000firms evaluated by Forbes in its annual report on American industry. Four measures offinancial performance were used: return on assets (ROA), return on equity (ROE), market valuation, and sales growth. A series of difference-of-means tests and direct tests were used to analyze the data. Results indicate that the excellent firms are not as superior as Peters and Waterman have suggested. The implications of these findings for culturelperformance research are discussed.