Technical Efficiency of Establishments in Malaysia’s Electrical and Electronics Industries: Exporting or Vertical Trade?

Noor Khalifah () and Zakiah Jaafar ()
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Noor Khalifah: School of Economics Faculty of Economics and Management Universiti Kebangsaan Malaysia 43600 UKM, Bangi, Selangor, Malaysia
Zakiah Jaafar: Economic Planning Unit Prime Minister’s Department 62502 Putrajaya Malaysia

Jurnal Ekonomi Malaysia, 2017, vol. 51, issue 1, 157-30

Abstract: This study compares export intensity and vertical trade intensity in determining technical efficiency (TE) of establishments in Malaysia’s electrical and electronics industries (E&E) amongst other explanatory variables. We measure fragmentation or vertical trade intensity as two-way trade or the overlap of exports and imported inputs weighted by gross output of establishments. In the overall sample of establishments, vertical trade intensity is a significant determinant of TE whereas export intensity is not. A bigger scale of production, a higher degree of vertical integration and higher labor quality are positively related to TE whereas higher industrial concentration is negatively associated with TE. In the sub-sample of ordinary trading establishments, export intensity is a significant determinant of technical efficiency whereas in the sub-sample of vertical trading establishments, export intensity is not a significant determinant of TE. Higher export intensity does not necessarily mean higher efficiency of establishments and hence, an unqualified policy of export expansion within the context of vertical trade and global value chains in production should be conducted with caution. Technical progress is not significant in all of the models estimated.

Keywords: Empirical studies of trade; firm organization; multinational firms (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ukm:jlekon:v:51:y:2017:i:1:p:157-30

DOI: 10.17576/JEM-2017-5101-2

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