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The efficiency of SMEs in Thai manufacturing: A stochastic frontier analysis

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  • Charoenrat, Teerawat
  • Harvie, Charles

Abstract

This study examines the technical efficiency of Thai manufacturing SMEs and their firm-specific determinants utilising firm-level industrial census data for 1997 and 2007. Results from a stochastic frontier production function and technical inefficiency effects model reveal that Thai SMEs are overwhelmingly labour intensive with low average technical efficiency in both years. Results also indicate that firm size, firm age, skilled labour, location, type of firm ownership, government assistance, foreign investment and export activity are important firm-specific factors contributing to the technical efficiency of SMEs. Specific policies are warranted to improve Thai SMEs. These policy measures include: easier access to financial services, access to skilled labour, training of the workforce and entrepreneurs, addressing location and regional capacity inequities, encouraging foreign investment for operational synergies and export incentives for penetration in the world market.

Suggested Citation

  • Charoenrat, Teerawat & Harvie, Charles, 2014. "The efficiency of SMEs in Thai manufacturing: A stochastic frontier analysis," Economic Modelling, Elsevier, vol. 43(C), pages 372-393.
    • Handle: RePEc:eee:ecmode:v:43:y:2014:i:c:p:372-393
    DOI: 10.1016/j.econmod.2014.08.009
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    More about this item

    Keywords

    Technical efficiency; Stochastic frontier production function; Technical inefficiency effects model; Small and medium sized enterprises; Manufacturing;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • N6 - Economic History - - Manufacturing and Construction
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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