Technical Efficiency Of Firms Research Articles

Mafia risk perception: Evaluating the effect of organized crime on firm technical efficiency and investment proclivity

The presence of illegal organizations in economic development settings contributes to the Italian economy’s regional heterogeneity by exacerbating other inefficiencies. We aim to investigate how three indicators of awareness of criminal interest in a firm’s activities affect the latter’s efficiency, as well as examining a potential channel through which illegal activities could hinder firm performance, using a unique set of firm-level data. According to our findings, the presence of criminal network pressure in a firm’s environment reduces its technical efficiency and propensity to invest. This phenomenon is particularly strong in Italy’s underdeveloped regions, across all illicit considered and risk classes, with inefficiency doubling when the fear of crime becomes significant. A similar pattern emerges in terms of firm investment proclivity. The research findings are relevant for policymakers because they demonstrate that even the perception of a criminal threat has significant effects on a firm’s performance; consequently, enhancing legal protection could prevent significant economic and social costs.

Diversification strategy and firm technical efficiency in Moroccan real estate sector: A Data envelopment analysis application

This research paper provides an additional empirical evidence by exploring the link between the diversification and economic performance. Diversification is a form of business strategy that aims to improve the profitability of the company by increasing the volume of sales thanks to the multiplication of products and services, and the conquest of new markets both locally and internationally. This paper aims to fill in the gap and investigate the relationship between business diversification and economic performance in the context of real estate businesses in Morocco. Economic performance has been approached from the perspective of the firm's resources, in particular its production function, represented by the variables of inventory and personnel costs. The sampling includes 60 firms in the real estate sector for the fiscal year of 2019/2020. A quantitative research method is used to measure the link between the diversification strategy and economic performance. The results show that diversification has important implications to drive profit-maximizing firms and advocate the economies of scale and scope. In addition, the findings reveal that growth contributes to scale and scope economies, but at the same time it can lead to diseconomies, when further impetus to economic integration and the increasing complexity of diversification no longer generate profit. The analysis of DEA scores reveal that on average, companies are underperforming with a score of technical efficiency not exceeding 41%; however their score of scale efficiency is pretty good with 85%; that is, most companies are operating at increasing return to scale. Keywords: Real Estate, Diversification, Morocco, DEA.

Technical Efficiency of Firms, A Comparison Study for Family and Non-Family-Owned Businesses in Southeast Asian Countries

This is a comparative study on firm efficiency, a proxy for firm performance, between family-owned business (FOB) and non-family-owned business (non-FOB). This study aims to determine a firms' efficiency by comparing FOB and non-FOB in Southeast Asia countries. The efficiency ratios for five Southeast Asian countries were estimated using Data Envelopment Analysis (DEA), before a two-sample T-test to determine the differences between FOBs and non-FOBs. Hence, secondary data research techniques from each country from 2007 to 2016 were used to conduct the comparison. The data were gathered from various sources. The findings did not archive any comparison in performance among FOBs and non-FOBs. This finding is fundamental for the Board of Director (BOD), senior management of the firms, researchers, policymakers, scholastics, and the overall population., Ceteris paribus, both FOB and non-FOB, ought to work at a similar efficiency even out and have the option to produce comparative returns for their shareholders. Subsequently, stakeholders can compare treatments to assist in alleviating the dependency on two unique treatments or strategies when managing FOB and non- FOB. In short, it could expand the BOD and management efficiency.

Bribery Environments and Manufacturing SME Efficiency: Evidence from a Transitional Economy

ABSTRACT The corporate governance literature focuses on the firm-level corrupt environments of firm performance and does not pay sufficient attention to the importance of competition and CEO gender. Motivated by recent developments integrating a bribery perspective with contextual moderators in firm efficiency studies, this study attempts to present empirical evidence regarding the bribery-efficiency relationship in Vietnamese small- and medium-sized enterprises (SMEs) from 2011 to 2015. Using the stochastic frontier approach to estimate firm technical efficiency scores, we find that an environment characterized by a high level of bribery has an adverse effect on firm efficiency. We also find that a dispersed business environment characterized by considerable heterogeneity in corruption perception is associated with an increase in firm efficiency. Furthermore, the results suggest that firms facing competitive forces are associated with less efficiency relative to firms without pressure. Moreover, efficiency tends to be greater for firms with a lower propensity to behave corruptly, such as firms managed by females. To investigate whether the effects of bribery on efficiency are dependent on firm competitive pressure and gender attitudes, we check whether these relations are particularly strong for firms highly pressured by competition and firms run by a female CEO; our results show strong support for this conjecture. The effects of competition and gender are particularly strong for firms operating in provinces with a low level of transparent competitiveness, while no effect is observed for firms that operate in provinces with a high level of competitive governance.

The Impact of ICT on Technical Efficiency of Vietnam’s Enterprises

This research evaluates the impact of ICT on the technical efficiency of firms in 63 provinces and cities in Vietnam. We apply to use the DEA method in which we use the variable return to scale to evaluate because firm sizes in 63 provinces are different. At the same time, this method aims to minimize input factors without reducing output factors to measure technical efficiency. This result that is used a binary variable in the logit regression model to identify factors that have an impact on technical efficiency, especially the ICT factor. The research results show that only nearly 10% of the provinces could be technically efficient in business activities. Provinces with sustainable performance and efficiency all depend on influencing factors such as equity ratio, labor productivity, market size, investment, and especially the ICT factor keep increasing over the years and fluctuate around a pretty high level. On the other hand, for the group of unsustainable and ineffective provinces, these variables tend to decrease and fluctuate around at a low level. The research shows that factors in labor productivity, equity ratio, market size, investment, and ICT all have a positive impact on a firm’s performance in 63 provinces and cities of Vietnam. Therefore, firms that want to enhance their efficiency need to have strategies to improve the factors mentioned above. Moreover, the local government needs to improve the ICT index to help to increase their local Enterprises’ efficiency.

INTERTEMPORAL EFFICIENCY AND PRODUCTIVITY CHANGING ON TELECOMMUNICATION INDUSTRY (TI) IN ASEAN-5

The study aims to measure the technical and intertemporal efficiency and find the primary source of productivity change on top three telecommunication firms in each country of ASEAN-5 (Indonesia, Malaysia, Thailand, Philippines, and Singapore) from 2010 to 2016. Data Envelopment Analysis (DEA) bootstrapping with 2000 iterations, DEA window, and Malmquist index are applied to calculate technical efficiency, intertemporal efficiency, and productivity change. The estimation results elucidate that, on average, the technical efficiency of firms is relatively low. On the opposite, the intertemporal efficiency results indicate that the mean efficiency score of each window is high. However, the LDW and LDP tend to be high, showing that the efficiency scores fluctuate. The Malmquist index calculation yields that technological progress possesses a significant contribution to productivity change.Keywords: Technical Efficiency, Intertemporal Efficiency, Productivity Change, Telecommunication Industry, ASEAN-5 JEL Classifications: L8, F6, O5, O1, O3

Does Foreign Presence Influence the Level of Firm Technical Efficiency? Evidence from Africa

Abstract This study investigates the impact of foreign direct investment on the level of firm technical efficiency in West Africa. Firms from Nigeria, Ghana, Sierra Leone and the Gambia were sampled due to the fact that they used to belong to the British Empire. The data, sourced from the World Bank enterprise survey, covers the period from 2006 to 2018, with the sampled countries having data for different years. A time varying stochastic frontier production function for panel was developed for this enquiry. The findings of the study show that foreign direct investment has a significant and positive impact on both technical efficiency and productivity of firms in West Africa. Controlling for other effects, international trade and firm size both have positive and significant effects on firm level technical efficiency. Therefore, policies should be aimed at encouraging more inflows and maintenance of the stock of foreign direct investment to avert divestments. This includes, but is not limited to, ensuring sociopolitical stability and introducing policies that would remove bureaucratic bottlenecks from the path of direct investment inflow and simplify the process of doing business in these countries.

Export guarantees and firm performance in the context of corporate governance

Micro, small and medium enterprises (MSMEs) the forerunners of the Indian economy equipped with the greatest potential of growth and employment opportunities are the focus of this paper. By examining firm-level data for years 2007-2008 and 2017-2018, this paper captures the simultaneous expenditure on insurance premium and export earnings on the technical efficiency of firms. On applying stochastic frontier production function, results reveal that Indian MSMEs although being labour intensive have high average technical efficiency in the two comparative years. Results also indicate that factors such as firm size, age, ownership, technological imports both embodied and disembodied, expenditure on R&D, and export guarantees contribute to the technical efficiency of MSMEs. The top 25 percent of efficient MSMEs in 2017-2018 rely more on exports, have higher forex earnings with higher expenditure on marketing & advertising, and expenditure on export guarantees. This thus warrants a further improvement in technical efficiency through access to financial services, skilled labour, training of labour, enhancing and attracting foreign investment for operational collaborations, and incentives for easier and risk-free penetration in the world market

Does competition and foreign investment spur industrial efficiency?: firm-level evidence from Indonesia

This study examines the effects of market competition and foreign direct investment on the technical efficiency of firms within the Indonesian manufacturing sector using a Stochastic Frontier Analysis. We employ a firm-level panel dataset for the period of 2010–2014, covering 400 subsectors, and employing two measures of industrial concentration as proxies for market competition. The results suggest that firms operating in less competitive sectors in Indonesia experience higher technical efficiency. Additionally, foreign ownership, international activity (export-import), and firm size are positively related to technical efficiency. Such findings suggest that the efficient structure hypothesis (ESH) applies in Indonesia, as more efficient firms gain in market share as a result from dynamic competition. Foreign direct investment (FDI) via horizontal spillovers has contributed to an increase in intra industry firms’ efficiency. Nevertheless, as industrial concentration increases, the positive effects in firm efficiency from FDI and from international trade (imports and export) tend to decrease.

Human capital and technical efficiency: a Stochastic Frontier Analysis of Caribbean firms

ABSTRACTTechnical efficiency is the ability of a firm to produce its maximum output using a set of inputs or to minimise the use of its inputs to produce a certain level of output. When a firm is operating at its most efficient, operating costs can be minimised, profits maximised and competitiveness improved. This study investigates the role of a firm’s human capital in impacting its technical efficiency. It uses the Productivity, Technology, Innovation survey (PROTEqIN) conducted for a sample of 13 Caribbean countries in 2014 and comprises 1,966 firms. To account for differences in efficiency of firms, a Stochastic Frontier Analysis is used to estimate the production function as well as technical efficiency scores. The efficiency scores are then regressed against workforce characteristics and other firm-specific control variables using a Tobit estimator with robust standard errors. The results suggest that workforce characteristics, in particular workforce composition in terms of the proportion of managers to total workforce and graduate and post-graduate education play an important role in influencing firm efficiency, perhaps more so than other firm-specific variables. Lastly, government technical assistance programmes in the Caribbean also act to improve firm technical efficiency.

Subsidies and technical efficiency of Czech food processing industry

At present, the New Common Agricultural Policy for the period 2021–2027 has been currently formulated. Future of the agriculture and food industry is now widely discussed. These sectors play an important role, and it is necessary to maintain their competitiveness and sustainability. In this context, the main aim of the paper is to evaluate the technical efficiency of food processing firms by using Stochastic Frontier Analysis applying True Fixed Effect model on production function. It was identified, that increase of subsidies cause a slight increase in the mean of technical inefficiency. Also, the technical efficiency of the firms without subsidies is higher than in the subsidised firms and differs statistically significantly in the time and also with respect to the region of the firm. To summarise, the effect of subsidies is negative as the obtaining of the subsidies is not related to higher technical efficiency.<br />

Evaluating Technical Efficiency of Firms of Different Sizes: A Case Study of Nigerian Upstream Players

Summary Technological advancements in the exploration and production (E&P) of oil and gas have been on the increase worldwide in recent decades. Nigeria, being one of the major oil and gas producers in the world, has become a hub of international oil and gas investors since the early 1960s. Nigeria hosts more than 80 oil and gas companies in its upstream sector, including international oil companies (IOCs), indigenous oil companies (IndOCs), marginal-field operators (MFOs). and a national oil company (NOC). However, there is an increasing concern from policy makers over scanty quantitative information on the relative technical efficiency (RTE) of these operators for effective upstream performance analysis. This paper attempts to cover this gap by providing estimates of the RTE index for upstream operators in Nigeria from 2010 to 2016. An output-oriented data-envelopment-analysis (DEA) framework is adopted that is based on constant-return-to-scale (CRTS) assumptions. For a CRTS-DEA model (cDEA model), three input and two output variables were considered. Empirical results show that approximately 19% of the operators perform along the CRTS efficient-production frontier. Consequently, it is recommended that policy makers formulate upstream policies that encourage aggressive reserves growth and ensure an optimal reserves/production ratio.

Addressing the Limits of Production Resources Through Partnerships to Improve Technical Efficiency: A Case Study of Micro and Small Industries in Indonesia 2014

The objective of the study is to understand the correlation between inter-firm cooperation and firm technical efficiency. It based on the background of the difficulties and limited production resources faced by micro and small industry (MSI) that impede them to move toward production frontier that makes the firm less efficient technically. Therefore, this study will discuss whether cooperation conducted by MSI will bring improved technical efficiency. Estimation is taken by using a maximum likelihood method on firm production function stochastically. Using data from Micro and Small Industry Survey Year 2004 published by the National Bureau of Statistic of Indonesia, inter-firm cooperation is measured through an index with Principal Component Analysis which reflects the degree of the cooperation. As the first study in Indonesia for the topic, result shows a positive correlation between inter-firm cooperation and technical efficiency in the micro industry, otherwise, the correlation is not found in small industry. This indicates that inter-firm cooperation is not “panacea” to attain technical efficiency, yet it is depending on the size of the firm.

GLOBAL SOURCING AND TECHNICAL EFFICIENCY – A FIRM-LEVEL STUDY ON THE ICT INDUSTRY IN SWEDEN

We analyse the relationship between international sourcing, measured as imports of intermediate inputs, and the technical efficiency of firms in the information and communications technologies (ICT) manufacturing industry in Sweden. Using stochastic frontier analysis, we provide evidence that global sourcing improves firms’ capabilities to combine and re-combine inputs in productive ways, thereby increasing technical efficiency. We find a robust relationship between technical efficiency and international outsourcing. First, we find that firms that are deeply integrated into global sourcing networks are closer to their own production frontier. Second, firms that are engaged in international sourcing are also closer to the industry efficiency frontier. These findings are consistent with the argument that international sourcing stimulates firms’ capabilities by enabling them to identify and adopt higher quality inputs or more efficient production and management practices. These findings also suggest that the variety and extent of firms’ global sourcing networks constitute an important source of differences in efficiency levels among firms the ICT manufacturing industry.

Heterogeneity of Long‐run Technical Efficiency of German Dairy Farms: A Bayesian Approach*

AbstractIn parametric efficiency studies, two alternative approaches exist to provide an estimate of the long‐run efficiency of firms: the dynamic stochastic frontier model and the generalised true random‐effects model. We extend the former in order to allow for heterogeneity in the long‐run technical efficiency of firms. This model is based on potential differences in firm‐specific characteristics and in firms’ inefficiency persistence. The model is applied to an unbalanced micro‐panel of German dairy farms over the period 1999 to 2009. Estimation of long‐run technical efficiency and inefficiency persistence is based on an output distance function representation of the production technology and estimated in a Bayesian framework. The results suggest that heterogeneity in long‐run technical efficiency of farms is mostly attributed to discrepancies in farm‐specific factors rather than differences in farms’ inefficiency persistence. Farm size is positively related to long‐run technical efficiency while subsidies exert a negative effect on the long‐run technical efficiency of farms. Inefficiency persistence is found to be very high, but heterogeneity in this persistence is low.

Impact of Economic Liberalization on Technical Efficiency of Firms: Evidence from India’s Electronics Industry

The purpose of the paper is to analyze the impact of economic liberalization on technical progress and technical efficiency of electronics hardware manufacturing firms in India. In this study, Translog stochastic frontier production function is estimated in order to measure technical progress and technical efficiency of firms in an era of economic liberalization. The results indicate that electronics hardware manufacturing firms in India have experienced a significant improvement in technical progress during 2002-2010 but the average level of technical efficiency of firms has declined during the same period. The study therefore, concludes that a number of firms have failed to appropriate the benefits of technical progress in India’s electronics industry. It has also been observed that implementation of the Information Technology Agreement (ITA) of World Trade Organization (WTO) does not have any significant impact on technical efficiency of firms operating in the electronics industry.

Une analyse non paramétrique de l'efficience technique des exploitations forestières suisses

A nonparametric analysis of the technical efficiency of Swiss forestry firms The chronic deficits of Swiss public forestry firms can be attributed in part to problems of efficiency. By using a nonparametric method of efficiency measurement, called data envelopment analysis (DEA), and on the basis of the data of the network of experimental forestry firms (TBN), this study attempts to shed light on these problems and propose an approach to detect them. In an effort to improve the performance and to increase the competitiveness, and while taking into account the multifunctionality of forests, this benchmarking exercise allows to compare the characteristics of the technical efficient firms with those of the non efficient firms. Overall, there is a great potential to increase the technical efficiency of firms by reducing the amount of labor and capital inputs used as well as administration costs. Wood production is generally less efficient in protective forests because of the difficult harvesting conditions. Moreover, less efficient firms generally have a higher tendency to outsource and obtain more State contributions when compared to efficient ones. Finally, efficient firms seem to be generally less diversified.

Does Investment Climate Matter for Firm's Technical Efficiency? An Application to Middle Eastern and North African Manufacturing

AbstractDrawing on World Bank enterprise surveys, this paper shows that investment climate (IC) is correlated with firms' technical efficiency (TE) in eight manufacturing industries of 22 developing countries. Essential aspects of IC include the quality of infrastructure, the experience and education of the labour force, the cost of and access to financing, and different dimensions of government–business relations. The empirical analysis also illustrates that IC deficiencies in many Middle‐East and North‐Africa countries are associated with low TE. The exception is Morocco and, to some extent, Saudi‐Arabia, where the IC and TE rank close to that of the sample's most efficient economies. The paper also highlights that industries more exposed to international competition, as well as small and medium domestic firms, exhibit a higher sensitivity to IC limitations. Copyright © 2014 John Wiley & Sons, Ltd.

Automation and production efficiency: An empirical analysis of ten manufacturing industries in a newly industrialised economy

Although considerable work has been done in the past two decades to quantitatively analyse the production and growth experience of many developing and developed countries, relatively little research has been done in evaluating the performance of the newly industrialised economies. Based on the 1989 census data, relevant production indices of ten major manufacturing industries in Singapore were analysed by estimating their stochastic production frontiers. The indices analysed include the average technical efficiency of firms, capital intensities, capital and labour elasticities and the marginal rate of technical substitution between labour and capital. In addition, technical inefficiencies of individual firms were estimated and collated with several hypothesized influences. These estimates will provide policy–makers with valuable information to evaluate the performance of the industries and to formulate strategic plans to lead the economy to higher economic growth.

A META-FRONTIER APPROACH TO MEASURE PRODUCTIVITY DIFFERENCES OF DOMESTIC AND FOREIGN AFFILIATED FIRMS

This paper aims to evaluate the performance of foreign affiliated and domestic firms in Turkish manufacturing subsectors covering the period 1992 and 2001. Due to the heterogeneity between domestic and foreign affiliated firms in terms of technology level, we construct a meta-frontier model to measure relative efficiency and technology gap ratios (TGR's) of domestic and foreign affiliated firms. We find that technical efficiencies of foreign affiliated firms are higher than domestic firms, and display a stable pattern during the investigation period. However; technology gap ratios indicate the existence of a negative relationship between the TGR's and technical efficiency of the firms in domestic subsectors. This means that technically efficient firms are in fact using the low level of technology. However the results do not indicate any significant relationship between the technical efficiency and TGR's of foreign affiliated firms.