Frontier analysis of the Philippine manufacturing efficiency
by Eduardo S. Gayosa; Emilyn Cabanda
International Journal of Information and Decision Sciences (IJIDS), Vol. 6, No. 1, 2014

Abstract: This research investigates the efficiency of 100 firms from ten selected manufacturing industries in the Philippines over the period 1995-2004, using the two frontier models. The aim of this research is to evaluate and measure the technical efficiency of selected firms by applying the data envelopment analysis (DEA) and stochastic frontier analysis (SFA) approaches. A total of 1,000 pooled data are analysed using both DEA and SFA methods. New findings reveal that the average technical efficiency scores of DEA and SFA are 57.4% and 82.63, respectively, but no statistically significant correlation found. New results also suggest that older firms tend to be more technically inefficient than younger firms while larger firms tend to be more technically efficient than smaller firms. Significantly, this research has also found that an imposition of higher tariff rates can make firms to be technically inefficient. Overall, this research provides significant evidences on the usefulness of two frontier methods for evaluating manufacturing efficiency as alternative tools of performance measurement for managerial decision making.

Online publication date: Sat, 05-Jul-2014

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