A two-stage process for explaining the relative efficiency of small and medium-size firms in Chile

The objective of this study is the identification of the organisational characteristics that could help explain the reasons behind the relative efficiency of small and medium firms in Chile. This is achieved first by discriminating the efficient firms from the inefficient ones using the data envelopment analysis (DEA) technique, and second, using contingency tables for identifying the organisational characteristics that discriminate the efficient units from the inefficient ones. The analysis utilises data of 500 firms located in the Valparaiso Region, separated by size, economic activity, number of workers, and other qualitative and quantitative attributes. The profile of efficient small and medium firms that statistically emerged from the study is: large sales volume together with small amounts of purchases and expenses - this implies high value added to what they sell -, low levels of fixed assets and depreciation - they rent what they need instead of purchasing it -, higher salaries are paid to a workforce that is smaller, better qualified and more productive.