Abstract
This paper analyses the performance of the small and medium-sized manufacturing firms during the period 1995–2001, focusing on the degree of technical inefficiency and its determinants. We use a micro panel data set to simultaneously estimate a stochastic frontier production function and the inefficiency determinants using an unbalanced panel of manufacturing firms. Our empirical results suggest that small and medium-sized firms tend to be less inefficient than the large firms are. Also, we centre our analysis in the effect on efficiency of some organisational factors related to the managerial ability to use and adjust capital and labour properly.
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Notes
Specially, sectors such as banking, agriculture, transport and electricity industries, hospitals and other non-profit sectors, see Lovell (1993) for a good survey of the frontier approach.
In a two-stage procedure, first of all a stochastic frontier production function is estimated and the inefficiency scores are obtained under the assumption of independently and identically distributed inefficiency effects. But in the second step, inefficiency effects are assumed to be a function of some firm-specific variables, which contradicts the assumption of identically distributed inefficiency effects.
Individual efficiency scores ui, which are unobservable, can be predicted by the mean or the mode of the conditional distribution of ui given the value of (vi−ui) using the technique suggested by Jondrow et al (1982).
We imposed the usual symmetry conditions to the translog function: βkj = βjk; j ≠ k.
LR = −2(ln[L(H0)]−ln[L(H1)](, where L(H0) and L(H1) are the values of the likelihood function under the null and alternative hypotheses. LR has an approximately χ 2 distribution with degrees of freedom equal to the number of restrictions.
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Acknowledgments
The authors wish to express their gratitude to the participants of the International Conference on Policy Modeling (2006) for their useful comments. The authors would also like to thank the Fundación Empresa Pública (FEP), especially the economics research programme (PIE), for providing the data source. The study has been supported by the projects of Science and Technology GV04B-086 and SEJ2005-08054.
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Diaz, M.A., Sanchez, R. Firm size and productivity in Spain: a stochastic frontier analysis. Small Bus Econ 30, 315–323 (2008). https://doi.org/10.1007/s11187-007-9058-x
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DOI: https://doi.org/10.1007/s11187-007-9058-x