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Market Structure, Government Shareholding and Cost Efficiency in Taiwan's Biotech Industry

Author

Listed:
  • Chen-Ming Chen

    (Department of Public Finance, Aletheia University, Taiwan)

  • Tzu-Chun Sheng

    (Department of Finance, Ling Tung University, Taiwan)

  • Yung-Lieh Yang

    (Department of Finance, Ling Tung University, Taiwan)

Abstract

Based on the two-step stochastic Meta frontier model developed by Huang et al. (2011), this study establishes translog cost functions. Our purpose is to estimate the performance of firms in terms of cost efficiency in Taiwan’s biotech and pharmaceutical industry, and to analyze group-specific and firm-specific environmental variables. The empirical results show that the value of the Meta frontier cost efficiency (MCE) indicator of the industry is 0.7241, indicating that it is basically 27.59% cost inefficient. The value of MCE in the pharmaceutical industry (0.7496) is higher than that in the medical equipment industry (0.7002). The empirical results also show that the cost efficiency of Taiwan’s biotech firms can positively benefit from the government’s contributions. In considering the differences between sub-industries, R&D activities are found to promote the growth of cost efficiency in both the pharmaceutical industry and medical equipment industry. As for the relationship between agency issues and cost efficiency, support is found for the Convergence-of-Interest Hypothesis in the pharmaceutical industry.

Suggested Citation

  • Chen-Ming Chen & Tzu-Chun Sheng & Yung-Lieh Yang, 2015. "Market Structure, Government Shareholding and Cost Efficiency in Taiwan's Biotech Industry," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 11(1), pages 69-100, January.
    • Handle: RePEc:jec:journl:v:11:y:2015:i:1:p:69-100
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    Citations

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    Cited by:

    1. John N. Ng’ombe, 2017. "Technical efficiency of smallholder maize production in Zambia: a stochastic meta-frontier approach," Agrekon, Taylor & Francis Journals, vol. 56(4), pages 347-365, October.

    More about this item

    Keywords

    market structure; government shareholding; cost efficiency; Taiwan Biotech Industry; Stochastic Meta Frontier Model;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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