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The Short-Term Measurement of the Creation of Value: The Importance of Technical Efficiency

In: Economic Value and Revenue Management Systems

Author

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  • Alessandro Capocchi

    (University of Milano-Bicocca)

Abstract

This chapter highlights how the short-term measurement of value creation requires the analysis of the technical efficiency of the business. Technical efficiency is the main condition for company profitability. In the short-term analysis, technical efficiency is the necessary, but not sufficient, condition for achieving economic efficiency. The managerial tools are more focused on the financial and economic dimension of the business than on the technical one. So, the problem is to integrate the financial and economic dimensions with the technical efficiency of the business. Technical efficiency is measured by the degree of use of the maximum production capacity available to the company. The increase in the level of use of the production capacity available to the company leads to an increase in profitability due to the reduction in the incidence of fixed costs. After describing the relationship between technical and economic efficiency, the author retraces the debate that in the 80s in Italy involved Egidio Giannessi with respect to the marginalist theories.

Suggested Citation

  • Alessandro Capocchi, 2019. "The Short-Term Measurement of the Creation of Value: The Importance of Technical Efficiency," Springer Books, in: Economic Value and Revenue Management Systems, chapter 4, pages 67-83, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-02417-8_4
    DOI: 10.1007/978-3-030-02417-8_4
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