Economics at your fingertips  

The choice of efficiency benchmarking metric in evaluating firm productivity and viability

S. C. West (), A. W. Mugera and R. S. Kingwell
Additional contact information
S. C. West: University of Western Australia
A. W. Mugera: University of Western Australia
R. S. Kingwell: University of Western Australia

Journal of Productivity Analysis, 2022, vol. 57, issue 2, No 5, 193-211

Abstract: Abstract The Debreu–Farrell measure of technical efficiency is widely used to benchmark firm performance. A limitation of this measure is that it is orientation restricted and evaluates the performance of a decision-making unit in an explicit direction relative to the best-practice frontier and not the most productive point on the frontier. Therefore, the measure does not provide policy insight on how to direct decision-making units to achieve the best possible productivity level. Taking a departure from conventional nonparametric benchmarking studies, this study benchmarks the performance of commercial farm businesses in the Western Australia’s wheatbelt region using total factor productivity efficiency (‘TFP efficiency’) and compares the results to those when the conventional technical efficiency measures are applied. We find that the two measures of firm performance differ and are influenced by different sources of firm heterogeneity. Therefore, derived policy insights and prescriptions also differ. This is an important insight that policymakers and practitioners need to be aware of.

Keywords: Total factor productivity efficiency; Technical efficiency; Performance benchmarking; Agriculture; C14; C43; D24; L21; Q12 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to full text is restricted to subscribers.

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:

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11123/PS2

DOI: 10.1007/s11123-022-00628-1

Access Statistics for this article

Journal of Productivity Analysis is currently edited by William Greene, Chris O'Donnell and Victor Podinovski

More articles in Journal of Productivity Analysis from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2022-05-12
Handle: RePEc:kap:jproda:v:57:y:2022:i:2:d:10.1007_s11123-022-00628-1