Measuring Eco-Inefficiency: A New Frontier Approach

Chien-Ming Chen () and Magali Delmas
Additional contact information
Chien-Ming Chen: Nanyang Business School, Nanyang Technological University, Singapore 639798, Republic of Singapore

Operations Research, 2012, vol. 60, issue 5, 1064-1079

Abstract: Growing social concerns over the environmental externalities associated with business activities are pushing firms to identify activities that create economic value with less environmental impact and to become more eco-efficient. Over the past two decades, researchers have increasingly used frontier efficiency models to evaluate productive efficiency in the presence of undesirable outputs, such as greenhouse gas emissions or toxic emissions. In this paper, we identify critical flaws in existing frontier models and show that these models can identify eco-inefficient firms as eco-efficient. We develop a new eco-inefficiency frontier model that rectifies these problems. Our model calculates an eco-inefficiency score for each firm and improvements in outputs necessary to attain eco-efficiency. We demonstrate through a Monte Carlo experiment that our eco-inefficiency model provides a more reliable measurement of corporate eco-inefficiency than the existing frontier models. We also extend the single-output Cobb-Douglas production function to multiple desirable and undesirable outputs. This extension allows for greater flexibility in the simulation analysis of frontier models.

Keywords: environmental performance; eco-efficiency; nonparametric frontier models; simulation (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (70)

Downloads: (external link)
http://dx.doi.org/10.1287/opre.1120.1094 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:60:y:2012:i:5:p:1064-1079

Access Statistics for this article

More articles in Operations Research from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().