Technical Efficiency of Thai Manufacturing SMEs: a Comparative Study of North-eastern Provinces

Teerawat Charoenrat and Charles Harvie ()
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Charles Harvie: University of Wollongong, http://business.uow.edu.au/econ/who/UOW010519.html

Economics Working Papers from School of Economics, University of Wollongong, NSW, Australia

Abstract: A major motivation of this study is to examine factors that are most important in contributing to the relatively poor efficiency performance of Thai manufacturing SMEs. The results obtained will be significant in devising effective policies aimed at tackling this poor performance. This paper uses data on manufacturing SMEs in the North-eastern region of Thailand in 2007 as a case study, by applying a stochastic frontier analysis (SFA) and technical inefficiency effects model. The empirical results obtained indicate that the mean technical efficiency of all categories of manufacturing SMEs in the North-eastern region is 43 percent, implying that manufacturing SMEs have high levels of technical inefficiency in their production process. Manufacturing SMEs in the North-eastern region are particularly labour intensive. The empirical results of the technical inefficiency effects model suggest that skilled labour, municipal area and ownership characteristics are important firm-specific factors affecting technical efficiency. The paper argues that the government should play a more substantive role in developing manufacturing SMEs in the North-eastern provinces through: providing training programs for employees and employers, encouraging greater usage of capital and technology in the production process of SMEs, enhancing the efficiency of state owned enterprises, encouraging a wide range of ownership forms and improving information and communications infrastructure.

Keywords: Technical Efficiency; Stochastic Frontier Analysis (SFA); Small and Medium sized Enterprises (SMEs); Manufacturing; North-eastern Region of Thailand (search for similar items in EconPapers)
JEL-codes: C31 C87 D24 O12 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2012
New Economics Papers: this item is included in nep-eff, nep-sbm and nep-sea
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Citations: View citations in EconPapers (1)

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