Employee motivation, external orientation and the technical efficiency of foreign-financed firms in China: a stochastic frontier analysis

Vincent Mok and Godfrey Yeung
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Vincent Mok: School of Accounting and Finance, Hong Kong Polytechnic University, Hong Kong, Postal: School of Accounting and Finance, Hong Kong Polytechnic University, Hong Kong
Godfrey Yeung: School of Social Sciences, University of Sussex, United Kingdom, Postal: School of Social Sciences, University of Sussex, United Kingdom

Managerial and Decision Economics, 2005, vol. 26, issue 3, pages 175-190

Abstract: By using a stochastic frontier model, we have identified several firm-specific attributes as determinants of technical efficiency in foreign-financed manufacturing firms in southern China. The empirical results suggest a strong association between efficiency and employee motivation, which includes the use of bonus incentives and flexibility in employment policy. In terms of the external orientation behavior of firms, the findings do not support the export|efficiency relationship. Sample firms with a high degree of export-orientedness were less efficient, possibly due to the high transaction costs in China of exportation. As for the effects of expatriate input on production, our empirical evidence revealed that firms with a relatively high expatriate ratio performed less efficiently than others did. These two findings may have significant implications for the marketing strategies and management (including the localization) of human resources of foreign-financed firms in China. Copyright © 2005 John Wiley & Sons, Ltd.

Date: 2005
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