OPJU Business Review

Research Articles

Vol. 5 No. 1 (2026): OPJU Business Review

Uncovering the latent structure of the logistics performance index: A principal component approach

DOI:
https://doi.org/10.63825/opjubr.2026.5.1.955
Submitted
22 February 2026
Published
11 July 2026

Abstract

This study examines the statistical structure and dimensional properties of the Logistics Performance Index (LPI) using 672 country-year observations. Descriptive results indicate moderate average logistics performance (Mean = 3.033) with substantial cross-country heterogeneity, particularly in infrastructure quality and customs efficiency. Pairwise correlations among the six LPI components are exceptionally high (r = 0.806–0.980, p < .001), suggesting strong linear dependence. Variance Inflation Factor diagnostics confirm severe multicollinearity, with four indicators exceeding the critical threshold of 10. To address this issue, Principal Component Analysis (PCA) is applied. The first principal component explains 90.86% of the total variance (eigenvalue = 5.451) and exhibits uniformly strong positive loadings across all indicators (0.387–0.419), indicating a single dominant dimension of logistics performance. The findings demonstrate that LPI components capture overlapping aspects of a unified latent construct rather than distinct independent dimensions. The study provides methodological justification for dimensionality reduction in LPI-based econometric modeling and highlights the necessity of integrated logistics policy interventions.

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