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Technical Efficiency of Thai Manufacturing SMEs: a Comparative Study of North-eastern Provinces

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Abstract

A major motivation of this study is to examine factors that are most important in contributing to the relatively poor efficiency performance of Thai manufacturing SMEs. The results obtained will be significant in devising effective policies aimed at tackling this poor performance. This paper uses data on manufacturing SMEs in the North-eastern region of Thailand in 2007 as a case study, by applying a stochastic frontier analysis (SFA) and technical inefficiency effects model. The empirical results obtained indicate that the mean technical efficiency of all categories of manufacturing SMEs in the North-eastern region is 43 percent, implying that manufacturing SMEs have high levels of technical inefficiency in their production process. Manufacturing SMEs in the North-eastern region are particularly labour intensive. The empirical results of the technical inefficiency effects model suggest that skilled labour, municipal area and ownership characteristics are important firm-specific factors affecting technical efficiency. The paper argues that the government should play a more substantive role in developing manufacturing SMEs in the North-eastern provinces through: providing training programs for employees and employers, encouraging greater usage of capital and technology in the production process of SMEs, enhancing the efficiency of state owned enterprises, encouraging a wide range of ownership forms and improving information and communications infrastructure.

Suggested Citation

  • Teerawat Charoenrat & Charles Harvie, 2012. "Technical Efficiency of Thai Manufacturing SMEs: a Comparative Study of North-eastern Provinces," Economics Working Papers wp12-03, School of Economics, University of Wollongong, NSW, Australia.
  • Handle: RePEc:uow:depec1:wp12-03
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    File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow119941.pdf
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    References listed on IDEAS

    as
    1. Quoc Ngu Vu, 2003. "Technical Efficiency of Industrial State-Owned Enterprises in Vietnam," Asian Economic Journal, East Asian Economic Association, vol. 17(1), pages 87-101, March.
    2. Coelli, Tim J., 1995. "Recent Developments In Frontier Modelling And Efficiency Measurement," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 39(03), December.
    3. George E. Battese & Greg S. Corra, 1977. "Estimation Of A Production Frontier Model: With Application To The Pastoral Zone Of Eastern Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 21(3), pages 169-179, December.
    4. Thi Bich Tran & R. Quentin Grafton & Tom Kompas, 2008. "Firm Efficiency in a Transitional Economy: Evidence from Vietnam," Asian Economic Journal, East Asian Economic Association, vol. 22(1), pages 47-66, March.
    5. Sangho Kim, 2003. "Identifying And Estimating Sources Of Technical Inefficiency In Korean Manufacturing Industries," Contemporary Economic Policy, Western Economic Association International, vol. 21(1), pages 132-144, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Technical Efficiency; Stochastic Frontier Analysis (SFA); Small and Medium sized Enterprises (SMEs); Manufacturing; North-eastern Region of Thailand;

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C87 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Econometric Software
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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