Measuring productivity in the biotechnology industry using the global Malmquist index

Abstract

This study applies the Data Envelopment Analysis (DEA)-based Malmquist Productivity Index (MPI) to measure productivity growth in Taiwanese biotechnology industry over time. The contemporaneous MPI and the global MPI are used to estimate and compare changes in productivity. In this study, we provide a single measurement of productivity change and its decompositions, that is, the global MPI. This index satisfies the circularity property and is free from the problem of base period dependency. Our results show that changes in productivity in the biotechnology industry are progressing. Under the assumption of Variable Returns to Scale (VRS), the sources of productivity change could be decomposed into Efficiency Change (EC), Best Practice Change (BPC) and Scale Change (SC). As result, the BPC and SC are progressing except for EC.