Innovation inputs and efficiency: manufacturing firms in Sub-Saharan Africa

2019 ◽  
Vol 22 (1) ◽  
pp. 59-83 ◽  
Author(s):  
Laura Barasa ◽  
Patrick Vermeulen ◽  
Joris Knoben ◽  
Bethuel Kinyanjui ◽  
Peter Kimuyu
Keyword(s):  
Technical Efficiency ◽  
Absorptive Capacity ◽  
Stochastic Frontier ◽  
Manufacturing Firms ◽  
Sub Saharan Africa ◽  
Foreign Technology ◽  
Firm Level ◽  
Cross Sectional ◽  
Content Type ◽  
Efficiency Effects

Purpose Countries in Africa have a common goal policy of industrialisation that is expected to be driven by investing in innovation that yields efficiency. The purpose of this paper is to investigate the technical efficiency effects arising from innovation inputs including internal R&D, human capital development (HCD), and foreign technology adoption in manufacturing firms in Africa. Design/methodology/approach This study uses cross-sectional firm-level survey data from the 2013 World Bank Enterprise Survey and the linked 2013 Innovation Follow-up Survey. A heteroscedastic half-normal stochastic frontier is used for analysing the technical efficiency effects of innovation inputs of 418 firms. Findings This study reveals that internal R&D, and foreign technology have negative effects on technical efficiency. Notwithstanding, the combination of foreign technology and internal R&D, and foreign technology and HCD reinforce each other’s effects on technical efficiency. Practical implications This study provides evidence that whereas individual innovation inputs may not yield positive efficiency outcomes, the combination of absorptive capacity enhancing inputs comprising internal R&D and HCD with foreign technology is vital for enhancing technical efficiency in manufacturing firms in Africa. This study offers important lessons for managers in manufacturing firms in Africa. Originality/value This study is virtually the first to investigate the relationship between innovation inputs and efficiency in Africa. This study demonstrates that investing in foreign technology in isolation from absorptive capacity enhancing innovation inputs diminishes efficiency. HCD and internal R&D are imperative for building absorptive capacity that enhances efficiency outcomes arising from foreign technology.

Determinants of return-on-equity in USA, German and Japanese manufacturing firms

2019 ◽  
Vol 45 (3) ◽  
pp. 445-451 ◽  
Author(s):  
Stephanie M. Weidman ◽  
Daniel J. McFarland ◽  
Gulser Meric ◽  
Ilhan Meric
Keyword(s):  
Manufacturing Industry ◽  
Financial Analysis ◽  
Important Determinant ◽  
Multivariate Regression Analysis ◽  
Manufacturing Firms ◽  
Firm Level ◽  
Cross Sectional ◽  
Content Type ◽  
Return On Equity ◽  
The Usa

Purpose DuPont financial analysis is generally used in micro-economic studies to compare an individual firm’s financial performance with industry averages. The purpose of this paper is to undertake a macro-economic cross-sectional analysis of the determinants of return-on-equity (ROE) in USA, German and Japanese manufacturing firms. Design/methodology/approach The authors use cross-sectional log-linear multivariate regression analysis to determine the elasticity of ROE to changes in net profit margin (NPM), total assets turnover (TAT) and equity multiplier (EQM) in USA, German and Japanese manufacturing firms. The authors obtain the data for the analysis from the COMPUSTAT Research Insight/Global Vintage database. Findings With data for all manufacturing firms, the authors find that the most important determinant of ROE is NPM in all three countries. The least important determinant of ROE is TAT in the USA and Germany, and EQM in Japan. Electronics is the most important manufacturing industry in all three countries, the authors also apply the analysis to data for the electronics manufacturing firms in the three countries. The authors find that an increase of 10 percent in NPM increases ROE by about 9.8 percent in Germany, by about 8.3 percent in the USA, and by about 6.9 percent in Japan. An increase of 10 percent in TAT increases ROE by about 2.2 percent in Germany and by about 1.5 percent in Japan. An increase of 10 percent in EQM increases ROE by about 1.9 percent in Germany and by about 1.5 percent in the USA. Practical implications The empirical findings of this study can provide useful insights for financial managers regarding the determinants of ROE they should focus on to achieve the greatest impact on ROE. Originality/value DuPont analysis is generally used as a micro-economic tool at the firm level. This study is a macro-economic application of the tool to study the cross-sectional determinants of ROE at the industry level.

Productivity growth in India's bakery manufacturing industry

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shiv Kumar ◽  
Abdulla ◽  
ChhatraPal Singh
Keyword(s):  
Technical Efficiency ◽  
Productivity Growth ◽  
Manufacturing Industry ◽  
Stochastic Frontier ◽  
Allocative Efficiency ◽  
Scale Efficiency ◽  
Firm Level ◽  
Indian States ◽  
Content Type ◽  
Bakery Industry

PurposeThe main aim of this paper is to examine the total factor productivity (TFP) and its components namely, technological change, technical efficiency change, scale change and allocative change in bakery industry in India.Design/methodology/approachThe study is based on panel data on 35 Indian states for the period 2009–2010 and 2012–2013. Stochastic frontier function is employed to estimate the productivity growth.FindingsThe results show that TFP is driven by technological progress, followed by technical efficiency and scale efficiency. Allocative efficiency, however, has a negative effect on TFP.Research limitations/implicationsThe bakery industry needs to define its innovation strategies, as these strategies lead to different outcomes that can be achieved only through the management of resources dedicated to the generation and implementation of innovations.Originality/valueUsing frontier production function takes the stochastic context into account for the dynamic behaviour of TFP and its components. Most of the past studies have assessed the TFP at the aggregate level using three-digit National Industrial Classification (NIC) or four-digit NIC code. An analysis at higher levels aggregation masks the variation in TFP and its components available at the firm level. This study uses five-digit NIC data to measure the firm specific TFP of bakery industry. Further, it looks at the contribution of technical progress (TP), technical efficiency, scale efficiency and allocative efficiency.

Market power, ownership and technical efficiency

2019 ◽  
Vol 12 (2) ◽  
pp. 275-294 ◽  
Author(s):  
Jiawu Dai ◽  
Xun Li
Keyword(s):  
Market Power ◽  
Technical Efficiency ◽  
Stochastic Frontier ◽  
Firm Level ◽  
Content Type ◽  
New Model ◽  
Stochastic Frontier Production Function ◽  
Stochastic Frontier Cost Function ◽  
Frontier Production Function ◽  
Oligopsony Power

Purpose The purpose of this paper is to estimate oligopsony power in the upstream factor market and oligopoly power in the downstream product market. On this basis, the paper intends to examine the effects of both oligopsony and oligopoly power as well as ownership on technical efficiency which were rarely discussed in previous studies. Design/methodology/approach First, based on the stochastic frontier production function, the paper constructs a new model that is capable to estimate oligopsony power for each observation. Second, the paper employs the popular dual stochastic frontier cost function to estimate marginal cost as well as oligopoly power. Then, the system GMM method with different sets of instrumental variables is applied to test the effects of the two-sided market power and ownership on technical efficiency. Findings Using unbalanced panel data at the firm level, the paper demonstrates that oligopsony power is significantly variant across different sectors. The most notable point is that oligopsony power in China’s soya and peanut oil industries is negative, while that in pork and beef industries is much stronger than those in other industries. In addition, state-owned enterprises (SOEs) are found to be less technically efficient in most of the selected industries, while SOEs with higher oligopsony power tend to be more technically efficient than non-state-owned enterprises(NSOEs), which is consistent with the quiet life hypothesis. Originality/value This paper sheds light mainly on three aspects. First, it proposes a new model to estimate oligopsony power for each single firm. Second, it tests the effect of oligopsony power on technical efficiency. Third, it distinguishes the differential effect of oligopsony power on technical efficiency between SOEs and NSOEs.

The impact of credit on the technical efficiency of maize-producing households in Northern Ghana

2019 ◽  
Vol 79 (3) ◽  
pp. 304-322 ◽  
Author(s):  
Edward Martey ◽  
Alexander N. Wiredu ◽  
Prince M. Etwire ◽  
John K.M. Kuwornu
Keyword(s):  
Technical Efficiency ◽  
Smallholder Farmers ◽  
Stochastic Frontier ◽  
Northern Ghana ◽  
Efficiency Gains ◽  
Cross Sectional ◽  
Content Type ◽  
Land Fragmentation ◽  
Credit Programs ◽  
The Impact

Purpose Production credit is essential for enhancing the technical efficiency (TE) and the welfare of smallholder farmers in Africa. The purpose of this paper is to examine the impact of credit on smallholders’ TE using cross-sectional data from 223 maize-producing households in Northern Ghana. Design/methodology/approach Due to the exogenous assignment of credit and assumption of homogeneity in farm technologies, the propensity score matching (PSM) analysis was used to compare the average difference in TE between farmers that had received credit and those that had not. Findings The results revealed that production credit impacts positively on smallholder farmers’ TE. Access to production credit is significantly influenced by access to markets and extension services, distance to market, asset index and land fragmentation. The provision of credit enhances the timely purchase and efficient allocation of farming inputs to produce the maximum possible output. Per capita income and land fragmentation also play important roles in reducing smallholders’ TE. Practical implications To increase efficiency gains, credit programs for agricultural interventions should target resource-poor smallholder farmers. The efficiency gains can be sustained through stronger partnerships with financial institutions. Policy interventions aimed at increasing smallholder farmers’ access to production credit (e.g. through the creation of a conducive investment environment that lowers the lending rate and collateral requirements) must be vigorously pursued. Originality/value To the best of authors’ knowledge, this is one of the only recent studies to examine the impact of credit on the TE of farming households by applying the translog stochastic frontier production function and the PSM approaches.

scholarly journals Comparative Analysis of Technical Efficiency of Wheat Production in Row Planting and Broadcasting Methods: Empirical Evidence from Southern Ethiopia

2020 ◽  
Author(s):  
Assefa Ayele Anaye ◽  
Kassa Tarekegn Erkalo
Keyword(s):  
Technical Efficiency ◽  
Stochastic Frontier ◽  
Wheat Yield ◽  
Sampling Procedure ◽  
Sub Saharan Africa ◽  
Southern Ethiopia ◽  
Cross Sectional ◽  
Technical Inefficiency ◽  
Wheat Production ◽  
The Government

Abstract Introduction Ethiopia is the largest wheat producer in Sub-Saharan Africa and wheat is one of the major staple food crops in many parts of the country. However, due to technical and socioeconomic factors the productivity of wheat is below the estimated potential. As a result of this the country remains a net importer of wheat. To improve this problem, row planting of wheat with improved level of efficiency becomes more crucial. This study was aimed to measure technical efficiency, yield gap due to inefficiency and identify the factors that influence the efficiency levels of wheat producers’ row planting and broadcasting methods in Hadiya zone, southern Ethiopia. Cross sectional data from 203 farmers from both row planting and broadcasting methods were selected using multistage sampling procedure and analyzed using stochastic frontier Cobb–Douglas production. Results and Conclusions Descriptive results indicated that the average wheat output in row planting (3250 kg/ha) was 1360 kg/ha higher than in broadcasting (1890 kg/ha). The estimated results of the Cobb-Douglas frontier model shows that the mean technical efficiency was 83.4% and 57.8% under row planting and broadcasting respectively. About 646.882 kg/ha under row planting and 1393.038 kg/ha under broadcasting of wheat output was lost due to inefficiency. This reveals that under the existing practices there is a room to increase wheat yield more under broadcasting (42.2%) than row planting (16.6%) following the best-practiced farms in the study area. The SPF model indicates that NPS, urea, labor and seed, are significant determinants of wheat production level in both methods. The estimated SPF model together with the inefficiency parameters shows that education, age, fertility status of the plot, family size and extension contact negatively and significantly affected technical inefficiency whereas land fragmentation positively and significantly affected technical inefficiency of wheat farmers. Hence, emphasis should be given to improve the efficiency level of those less efficient farmers by adopting the practices of relatively efficient farmers in the area. Beside this, policies and strategies of the government should be directed towards the above mentioned determinants.

scholarly journals Technical Efficiency of Manufacturing Enterprises in Libya: A Stochastic Frontier Analysis

2013 ◽  
Vol 5 (2) ◽  
pp. 528-535
Author(s):  
Hodud Essmui ◽  
Madeline Berma ◽  
Faridah Bt. Shahadan ◽  
Shamshubarida Bt. Ramlee
Keyword(s):  
Technical Efficiency ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Manufacturing Firms ◽  
Firm Level ◽  
Frontier Analysis ◽  
Manufacturing Enterprises ◽  
Stochastic Frontier Production Function ◽  
Econometric Approach ◽  
Frontier Production Function

This paper examines the performance of manufacturing firms in Libya. Specifically, it evaluates firm level technical efficiency. The paper uses an econometric approach based on a stochastic frontier production function to analyze 207 firms from survey conducted from March to May 2013. The results from estimations reveal that technical efficiencies of Libyan manufacturing firms ranging from 37.77 percent to 95.27 percent, with an average of 71.27 percent. While, the percent of firms that considered technically efficient is only 17.87 percent of the total firms.

Information risk, stock returns, and asset pricing: Evidence from China

2017 ◽  
Vol 30 (4) ◽  
pp. 379-394 ◽  
Author(s):  
Raheel Safdar ◽  
Chen Yan
Keyword(s):  
Stock Returns ◽  
Factor Model ◽  
Empirical Literature ◽  
Firm Level ◽  
Cross Sectional ◽  
Market Pricing ◽  
Content Type ◽  
Information Risk ◽  
Accruals Quality ◽  
Three Factor

Purpose This study aims to investigate information risk in relation to stock returns of a firm and whether information risk is priced in China. Design/methodology/approach The authors used accruals quality (AQ) as their measure of information risk and performed Fama-Macbeth regressions to investigate association of AQ with future realized stock returns. Moreover, two-stage cross-sectional regression analysis was performed, both at firm level and at portfolio level, to test if the AQ factor is priced in China in addition to existing factors in the Fama French three-factor model. Findings The authors found poor AQ being associated with higher future realized stock returns. Moreover, they found evidence of market pricing of AQ in addition to existing factors in the Fama French three-factor model. Further, subsample analysis revealed that investors value AQ more in non-state owned enterprises than in state owned enterprises. Research limitations/implications The study sample comprises A-shares only and the generalization of the findings is limited by the peculiar institutional and economic setup in China. Originality/value This study contributes to market-based accounting literature by providing further insight into how and if investors value information risk, and it seeks to fill gap in empirical literature by providing evidence from the Chinese capital market.

Technical efficiency and its determinants in the Indian textile garments industry

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Abdulla ◽  
Shiv Kumar
Keyword(s):  
Panel Data ◽  
Technical Efficiency ◽  
Textile Industry ◽  
Small And Medium Enterprises ◽  
Stochastic Frontier ◽  
Efficiency Score ◽  
Value Chains ◽  
Small Scale ◽  
Content Type ◽  
Medium Enterprises

Purpose This paper aims to examine technical efficiency and its determinants in Indian textile garments industry in post-agreement on textiles and clothing regime and evaluate the technical efficiency among micro, small and medium enterprises (MSMEs) firms. Design/methodology/approach This study uses unbalanced panel data for the period 2005–2010 to 2015–2016. The stochastic frontier function is used to estimate technical efficiency and its determinants. Findings The results show that the overall ecosystem of textile garments’ value chains could be improved to enhance the technical efficiency thereof. The result also reveals that small-scale firms have the highest technical efficiency scores, and medium-scale firms have the least technical efficiency score among all the categories of MSMEs. Research limitations/implications The textile garments industry needs to define its innovation strategies, as these strategies lead to different results that can be achieved only through the management of resources dedicated to the generation and implementation of innovations. Practical implications This study has shown that to offset India’s cost disadvantage in the international markets, there is a need to develop an ecosystem of textile manufacturing and value chains, eliminate the inverted duty structure (where inputs are taxed at a higher rate than the final product) and switch over from shuttle looms toward shuttle-less looms. This would unleash the potential of textile and garments industry and make it globally competitive and technically efficient. Further, there will be an alignment with the ease of doing business with an appropriate mix of policy, technology, institution, infrastructure, information and services. Originality/value Using frontier production function takes stochastic context into account for the dynamic character of technical efficiency and its components. Most of the past studies have assessed technical efficiency at the aggregate level using three-digit National Industrial Classification (NIC) or four-digit NIC code. An analysis at higher levels of aggregation masks the variation in technical efficiency. This study used five-digit NIC data to measure the firm-specific technical efficiency of the textile industry. According to the authors’ knowledge, this study is the first of its kind in the Indian textile industry using stochastic frontier approach and panel data. Further, it also looks at the contribution of different determinants in technical efficiency to the firms.

Strategic orientations, firm performance and the moderating effect of absorptive capacity

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Manuel-Alejandro Ibarra-Cisneros ◽  
María del Rosario Demuner-Flores ◽  
Felipe Hernández-Perlines
Keyword(s):  
Firm Performance ◽  
Market Orientation ◽  
Absorptive Capacity ◽  
Entrepreneurial Orientation ◽  
Manufacturing Firms ◽  
Moderating Effect ◽  
Equation Modeling ◽  
Content Type ◽  
Strategic Orientations ◽  
The Relationship

PurposeThe purpose of this article is to study the moderating effect of absorptive capacity, defined as the set of organizational routines and processes through which companies acquire, assimilate, transform and exploit knowledge to produce a dynamic organizational capacity (Zahra and George, 2002), in three strategic orientations: market orientation; technology orientation and entrepreneurial orientation and their positive relationship in the performance of the medium and large Mexican manufacturing firms. Likewise, it is determined whether these three combined SOs influence firm performance.Design/methodology/approachThe data was collected from 171 medium and large-sized Mexican manufacturing firms. The proposed hypotheses are tested using partial least square structural equation modeling (PLS-SEM).FindingsDespite the importance of knowledge for the development of firms, the results indicate that the moderating effect of absorptive capacity is only present in the relationship between entrepreneurial orientation and firm performance. That is, firms cannot take advantage of knowledge simultaneously between the three strategic orientations. For their part, market orientation and entrepreneurial orientation exert a positive influence on firm performance.Practical implicationsThe main practical implication for the manufacturing industry is that they must develop mechanisms to detect what kind of knowledge affects each strategic orientation, in this way it can make the absorptive capacity influence the relationships between SO and FP.Originality/valueThe main contribution consists of studying the moderating effect of the absorptive capacity on the relationship between three strategic orientations and firm performance, and not concentrating solely on the simultaneous use of these strategies as is commonly done.

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