scholarly journals Determinants of firm-level technical efficiency: evidence using stochastic frontier approach

2008 ◽  
Vol 5 (3) ◽  
pp. 225-239 ◽  
Author(s):  
Evis Sinani ◽  
Derek C. Jones ◽  
Niels Mygind
Keyword(s):  
Technical Efficiency ◽  
Firm Size ◽  
Stochastic Frontier ◽  
Returns To Scale ◽  
Budget Constraints ◽  
Stochastic Frontiers ◽  
Firm Level ◽  
Soft Budget Constraints ◽  
Labor Quality ◽  
Enhance Efficiency

By estimating stochastic frontiers we investigate the determinants and dynamics of firm efficiency. We use a representative sample of Estonian firms for the period 1993-1999 – and are able to address problems that plague much previous work, such as the endogeneity of ownership. Our main findings are that: (i) foreign ownership increases technical efficiency; (ii) firm size and higher labor quality enhance efficiency, while soft budget constraints adversely affect efficiency; (iv) Estonian firms operate under constants returns to scale; (v) the percentage of firms operating at high levels of efficiency increases over time. As such our findings provide support for hypotheses that a firm’s ownership structure and its characteristics such as firm size, labor quality, soft budget constraints and time of privatization are important for its technical efficiency.

scholarly journals Measurement of technical efficiency in the case of heterogeneity of technologies used between firms – Based on evidence from Polish crop farms

2021 ◽  
Author(s):  
Jerzy Marzec ◽  
Andrzej Pisulewski
Keyword(s):  
Technical Efficiency ◽  
Production Function ◽  
Prior Distribution ◽  
Prior Information ◽  
Stochastic Frontier ◽  
Returns To Scale ◽  
Random Coefficients ◽  
Point Of View ◽  
Model Specification ◽  
Stochastic Frontier Models

In the present study, we have investigated several competing stochastic frontier models which differ in terms of the form of the production function (Cobb-Douglas or translog), inefficiency distribution (half-normal or exponential distribution) and type of prior distribution for the parameters (hierarchical or non-hierarchical from the Bayesian point of view). This last distinction corresponds to a difference between random coefficients and fixed coefficients models. Consequently, this study aims to examine to what extent inferences about estimates of farms' efficiency depend on the above assumptions. Moreover, the study intends to investigate how far the production function's characteristics are affected by the choice of the type of prior distribution for the parameters. First of all, it was found that the form of the production function does not impact the efficiency scores. Secondly, we found that measures of technical efficiency are sensitive to distributional assumptions about the inefficiency term. Finally, we have revealed that estimates of technical efficiency are reasonably robust to the prior information about the parameters of crop farms' production technology. There is also a resemblance in the elasticity of output with respect to inputs between the models considered in this paper. Additionally, the measurement of returns to scale is not sensitive to model specification.

A Stochastic Frontier Analysis of Exporting Small and Medium Sized Enterprises in India

2016 ◽  
Vol 7 (3) ◽  
pp. 1-23
Author(s):  
Manoj Kumar
Keyword(s):  
Technical Efficiency ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Returns To Scale ◽  
Key Factors ◽  
Technical Inefficiency ◽  
Frontier Analysis ◽  
Efficiency Performance ◽  
Size Firm ◽  
Almost All

This study employs a stochastic frontier analysis (SFA) and technical inefficiency effects model to predict the technical efficiency of 3,168 Indian manufacturing and exporting SMEs, analyze their returns to scale and key factors impacting on their technical efficiency. Indian manufacturing and exporting SMEs extensively rely on labor rather than capital to increase their output, including almost all exporting SME groups, except those exporting to North & South America. The production of Indian manufacturing SMEs exporting to Oceania, however, has increasing returns to scale (1.1965). The inefficiency effects model reveals that firm size, firm age, foreign ownership, location and government assistance are firm-specific factors that significantly affect the technical inefficiency of production. Finally, evidence-based policies are also provided to facilitate improvement in the technical efficiency performance of Indian manufacturing and exporting SMEs.

scholarly journals Technical Efficiency of Independent Oil Palm Smallholder In Indonesia

2021 ◽  
pp. 59
Author(s):  
Firna Varina ◽  
Sri Hartoyo ◽  
Nunung Kusnadi ◽  
Amzul Rifin
Keyword(s):  
Technical Efficiency ◽  
Oil Palm ◽  
Technical Assistance ◽  
Stochastic Frontier ◽  
Returns To Scale ◽  
Stochastic Frontier Approach ◽  
Funding Sources ◽  
Result Show ◽  
Input Variables ◽  
Farmer Education

This study assesses technical efficiency and possible sources of inefficiency of independent smallholder oil palm production in Indonesia with stochastic frontier approach.  The result show all the input variables is  positively affect the oil palm production and exhibit decreasing returns to scale .  The farmers have mean technical efficiency (TE) values 0.6541, however about 53 % farmers have TE above 0.70. Factors such as age of farmer, education, extension services, member of farmer group,  land ownership and funding sources have a positive and significant effect on technical efficiency. It is suggested that by improving factors such as input used, education level, technical assistance on farming practice and accessibility to credit facilities should be increase the productivity and technical efficiency of oil palm production.  The farmers who have plant over 30 years old, which the TE and productivity are the lowest values,  should be thinking about replanting

scholarly journals Risk Adjusted Production Efficiency of Maize Farmers in Ethiopia: Implication for Improved Maize Varieties Adoption

2017 ◽  
Vol 5 (9) ◽  
pp. 1099
Author(s):  
Sisay Diriba Lemessa ◽  
Molla Alemayehu Yismawu ◽  
Megersa Debela Daksa ◽  
Mulugeta Damie Watabaji
Keyword(s):  
Technical Efficiency ◽  
Production Efficiency ◽  
Stochastic Frontier ◽  
Returns To Scale ◽  
Stochastic Frontier Approach ◽  
Technical Inefficiency ◽  
Maize Production ◽  
Production Risk ◽  
Access To Credit ◽  
Maize Varieties

This study analyzes the technical efficiency and production risk of 862 maize farmers in major maize producing regions of Ethiopia. It employs the stochastic frontier approach (SFA) to estimate the level of technical efficiencies of stallholder farmers. The stochastic frontier approach (SFA) uses flexible risk properties to account for production risk. Thus, maize production variability is assessed from two perspectives, the production risk and the technical efficiency. The study also attempts to determine the socio-economic and farm characteristics that influence technical efficiency of maize production in the study area. The findings of the study showed the existence of both production risk and technical inefficiency in maize production process. Input variables (amounts per hectare) such as fertilizer and labor positively influence maize output. The findings also show that farms in the study area exhibit decreasing returns to scale. Fertilizer and ox plough days reduce output risk while labor and improved seed increase output risk. The mean technical efficiency for maize farms is 48 percent. This study concludes that production risk and technical inefficiency prevents the maize farmers from realizing their frontier output. The best factors that improve the efficiency of the maize farmers in the study area include: frequency of extension contact, access to credit and use of intercropping. It was also realized that altitude and terracing in maize farms had influence on farmer efficiency.

scholarly journals THE EFFECT OF FOREIGN DIRECT INVESTMENT SPILLOVER ON THE LEVEL OF TECHNICAL EFFICIENCY IN LARGE AND MEDIUM MANUFACTURING INDUSTRY IN EAST JAVA

2020 ◽  
Vol 5 (1) ◽  
pp. 6
Author(s):  
Ahmad Oktabri Widyananda ◽  
Dyah Wulan Sari
Keyword(s):  
Foreign Direct Investment ◽  
Technical Efficiency ◽  
Direct Investment ◽  
Manufacturing Industry ◽  
Positive Impact ◽  
Stochastic Frontier ◽  
Positive Influence ◽  
Foreign Firms ◽  
Stochastic Frontier Approach ◽  
Firm Level

Foreign Direct Investment (FDI) takes an important role in the development process, especially in developing countries. The purpose of this study is to examine and analyze FDI spillover on the level of technical efficiency in the large and medium manufacturing industry in East Java. This study uses a time-varying stochastic frontier approach for firm-level panel data of the East Java manufacturing industry. The results show that all factors in this study affect the level of technical efficiency of large and medium industries in East Java. Variable foreign share, FDI horizontal spillover, and firm size have a positive influence on the technical efficiency of the industry. Whereas the variable FDI backward spillover, FDI forward spillover and the level of market concentration negatively affect the level of technical efficiency of the industry. Finally, it’s needed to build synergies and sustainable relationships between products produced by domestic and foreign firms. Thus, the presence of foreign firms in East Java could have a positive impact on improving the technical efficiency of the domestic industry both at the upstream and downstream levels. Keywords: Foreign Direct Investment Spillover, Technical Efficiency, East Java IndustryJEL Classification: F21, L60, D24

scholarly journals The Dynamics and Sources of Technical Efficiency of the Manufacturing Industries in Bangladesh

2020 ◽  
Author(s):  
Sheikh Jafar Emran ◽  
Md. Moniruzzaman
Keyword(s):  
Technical Efficiency ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Returns To Scale ◽  
Manufacturing Industries ◽  
Efficiency Gain ◽  
Firm Characteristics ◽  
Frontier Analysis ◽  
Textile And Apparel ◽  
Wooden Furniture

Abstract This paper aims to analyze the dynamics of technical production efficiency of the manufacturing sector in Bangladesh using the cross-sectional data collected under the Survey of Manufacturing Industries (SMI) conducted in 2006 and 2012. Based on the dynamics of mean efficiency scores among the industries derived using Stochastic Frontier Analysis(SFA) techniquewith Cobb-Douglas technology with half-normal distribution during the considered period three most efficiency gainer industries are ((i) Jute textile,(ii) Dying and bleaching of textiles, and(iii) Bidies respectively. On the other hand, under SFA specification with Translog production function top three efficiency gainers are (i) Jute textile,(ii) Bidies, and(iii) Fish, Crustaceans and Molluses respectively. Under constant returns to scale in Data Envelopment Analysis(DEA), based on the mean efficiency score top three efficiency gainers are(i) Fibre textile,(ii) Embroidery of textile and apparel, and(iii) Wooden furniture and fixture respectively while undervariable returns to scale top three gainers are(i) Fibre textile,(ii) Embroidery of textile and apparel, and(iii) Wooden furniture and fixture respectively. Whatever technique we employ, we find that most cases garments or garments related industries remain among top performers in terms of efficiency gain. This indicates that garments industries have improved significantly in terms of efficiency to survive in world competition. Moreover, our results suggest that firm characteristics, location factors as well as ownership features are more important jointly rather than individually to enhance efficiency. Locational and ownership characteristics jointly, in most cases, are also not so influential in pulling the efficiency measures up. However, the firm characteristics are very important in raising the technical efficiency of the firms, especially in case of stochastic frontier analysis. And firm characteristics shows stronger impacts in interaction with other locational and/or ownership characteristics.

scholarly journals Technical Efficiency and Production Risk of Rice Farms under Anchor Borrowers Programme in Kebbi State, Nigeria

2019 ◽  
pp. 1-12
Author(s):  
A. H. Kara ◽  
M. N. Shamsudin ◽  
Z. Mohamed ◽  
I. B. Latiff ◽  
K. W. K. Seng
Keyword(s):  
Technical Efficiency ◽  
Stochastic Frontier ◽  
Returns To Scale ◽  
Policy Option ◽  
Risk Averse ◽  
Technical Inefficiency ◽  
Production Risk ◽  
Cultivation Technique ◽  
Land Cultivation ◽  
The Mean

This study estimates technical efficiency and production risk of rice farms under Anchor Borrowers Programme (ABP) in Kebbi State, Nigeria. The study employed Stochastic Frontier Production (SFA) with flexible risk specifications to a sample of 231 rice producers surveyed in 2016 production season. The findings shows that seed, fertilizer, agrochemicals and labour inputs influenced rice output positively. The production technology characterizing rice farms in the study area exhibit increasing returns to scale. Fertilizer and agrochemicals are estimated to decrease variance of the value of output while seed and labour are estimated to increase the variance of the value of output. This implies that a risk-averse farmer will use more of fertilizer and agrochemicals and less of seed and labour than a risk neutral farmer. The mean technical efficiency estimates was 85.3 percent. Several characteristics of the farmers such as education, farming experience, extension contact, land cultivation technique and planting technique significantly decrease technical inefficiency of the farmers. The study concludes that, on the average 14.7 percent of potential output is lost due to technical inefficiency and production risk in inputs and recommends the use of best farm practice to produce rice efficiently. Policy option should also consider the incorporation of production risk in technical efficiency analysis if the inputs are non-neutral in risk.

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

2017 ◽  
Vol 18 (5) ◽  
pp. 877-896 ◽  
Author(s):  
Martin ANDERSSON ◽  
Trudy-Ann STONE
Keyword(s):  
Technical Efficiency ◽  
Manufacturing Industry ◽  
Management Practices ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Efficient Production ◽  
Global Sourcing ◽  
Firm Level ◽  
Frontier Analysis ◽  
International Sourcing

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.

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.

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