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Technical inefficiency and firm behavior: A panel study of small and medium Japanese manufacturing firms

Year: 2023

Type: article

Abstract: This study examines the technical inefficiency of small and medium Japanese manufacturing firms by using panel data from the Basic Survey on Small and Medium Enterprises (2009–2018). We estimate the stochastic frontier production function with four production factors (regular workers, nonregular workers, capital stock and materials) and calculate the technical inefficiency of individual firms by applying a true random effects model that can distinguish technical inefficiency from firm heterogeneity. We find that inefficient firms are smaller, rely more on nonregular workers, exhibit poorer firm performance, have a higher debt-asset ratio, pay a lower interest rate and are inactive in capital investment and R&D investment. We also find that inactive capital investment and a high debt-asset ratio are mainly responsible for causing technical inefficiency.

Source: Social Sciences & Humanities Open

DOI: 10.1016/j.ssaho.2022.100388

Author: Kazuo Ogawa

Institution: Kansai Gaidai University

Language: English

Topic: Efficiency Analysis Using DEA

Subfield: Management Science and Operations Research

Field: Decision Sciences

Domain: Social Sciences

SDGs: Decent work and economic growth, Industry, innovation and infrastructure

Open Access status: gold

Estimated APC paid: $825