Technical efficiency in the Malaysian electric and electronic manufacturing industry: A stochastic frontier analysis approach

Abstract

This study measured the level of technical efficiency (TE) that exerted a significant impact on the Malaysian electric and electronic manufacturing industry, which consists of 13 sub-industries, from 2010 to 2015. Unbalanced panel data from 1880 firms was obtained from the Department of Statistics Malaysia. We used stochastic frontier (SFA) analysis with the transcendental logarithmic approach to estimate the empirical analysis parametric. The maximum likelihood estimated regression of the SFA parameters revealed a high total average TE of 0.944%. Both the manufacturing sub-industries for communications equipment (MSIC 263) and irradiation, electromedical, and electrotherapeutic equipment (MSIC 266) demonstrated the highest average TE value and consistency (0.989%). The consumer electronics manufacturing sub-industry (MSIC 264) yielded a notably lower TE level (0.846%). Changes in TE for all industries were monitored via standard deviation analysis. The low standard deviation (SD) for MSIC 263, 271, and 275 indicated continuous progress and demands for these industries, while the higher SD for MSIC 264, 266, 272, and 273 pointed out major changes that happened within the period. The findings demonstrated that studies on the TE levels indicate that the E&E manufacturing industry has highly expended and continuous efforts to update technologies and human capital innovations. Therefore, the practical implication is to achieve Sustainable Development Goal 9 for sustainable industrialization and fostering innovation by 2030.