Technical efficiency of Thai manufacturing SMEs: a comparative study of north-eastern provinces
This study estimates the technical efficiency of manufacturing SMEs in the north-eastern region of Thailand in 2007 by using a stochastic frontier analysis (SFA) and technical inefficiency effects model. Data for manufacturing SMEs in the north-eastern region can be categorized into three aspects: by aggregate manufacturing SMEs, by size of SME, by selected three provinces in the north-eastern region. These categories are estimated individually to predict the technical efficiency and investigate whether technical efficiency is positively or negatively related to firm-specific factors. The empirical results 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 labour intensive. The empirical results of the technical inefficiency effects model suggested that skilled labour, municipal area, ownership characteristics are found to be important firm-specific factors affecting the technical efficiency. However, technical inefficiency effects arising from other factors are less systematic and vary across categories. It is suggested that the Thai government should play a significant role in developing manufacturing SMEs, such as through training programs for employees and by means of targeted financial assistance.