Accounting for intra-industry technological heterogeneity in the measurement of operations efficiency

Mike G. Tsionas and Pankaj C. Patel

International Journal of Production Economics, 2023, vol. 260, issue C

Abstract: In operations management literature, efficiency is usually measured using parallel shifts of production functions. This practice is based on the assumption that operations technologies are similar across decision-making units. Relaxing this assumption is essential as firms endowed with heterogeneous operational technologies develop distinctive operational resources and capabilities that vary systematically within an industry, resulting in non-parallel shifts of production functions. By relaxing the assumption of parallel production functions, we focus on technological differences as a measure of inefficiency in production and use non-parametric local linear estimates. Our approach based on Bayesian methods and stochastic dominance is novel in that it models for non-parallel production curve slopes that account for unknown frontier technology which is not observed but can be estimated using intra-industry variation in individual firm operational technologies. The proposed approach makes an important contribution to operations management research by relaxing a non-trivial assumption of parallel shifts of production functions in efficiency analysis.

Keywords: Productivity and competitiveness; Stochastic frontier models; Technological differences; Technical efficiency (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:260:y:2023:i:c:s0925527323000671

DOI: 10.1016/j.ijpe.2023.108835

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