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Impact of Unconducive Macro-Business Environment on Productive Efficiency and Capacity Utilization among SMEs in Liberia

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  • Aloyce R. Kaliba

    ()
    (College of Business, Southern University and A&M College, USA)

  • Ashagre A. Yigletu

    (College of Business, Southern University and A&M College, USA)

  • Wede E. Brownell

    (College of Business and Public Administration, University of Liberia)

  • Edna G. Johnny

    ()
    (College of Business and Public Administration, University of Liberia)

  • Tuwehi C. Ziadee

    (College of Business and Public Administration, University of Liberia)

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    Abstract

    An accommodating macro business environment is one that encourages firms to operate efficiently. Such conditions strengthen incentives for firms to be innovative and to increase productive efficiency. Unconducive macro business environment acts as a negative input to the production process. We use the 2008/09 Liberia¡¯s Small Business Enterprise Survey data to estimate firm level score of unconducive macro business environment using a two parameter Rasch Model. The estimated scores were incorporated in an output-semi-oriented radial Data Envelopment Analysis (DEA) model as undesirable inputs. The DEA model was used to estimate technical efficiency and capacity utilization of each enterprise. Estimated technical efficiency and revenue gap were regressed on all inputs using a Tobit model. The results indicate that increase in unconducive macro business environment decreased capacity utilization. To promote the role of small and medium enterprise in sustainable economic development, Liberia needs to improve enterprise¡¯s access to financial services, increase supply of electricity, and combat corruption by public officials.

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    Bibliographic Info

    Article provided by Better Advances Press, Canada in its journal Review of Economics & Finance.

    Volume (Year): 2 (2012)
    Issue (Month): (February)
    Pages: 97-110

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    Handle: RePEc:bap:journl:120108

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    Related research

    Keywords: Data envelopment analysis; Liberia; Macro business environment; Rasch; Small and medium enterprise (SME);

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    1. Aghion, Philippe & Blundell, Richard William & Griffith, Rachel & Howitt, Peter & Prantl, Susanne, 2005. "The Effects of Entry on Incumbent Innovation and Productivity," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5323, C.E.P.R. Discussion Papers.
    2. Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 68(3), pages 351-81, July.
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