Publication Details

Amornkitvikai, Y., Harvie, C. & Charoenrat, T. (2013). Factors affecting the technical inefficiency of Thai manufacturing and exporting small and medium sized enterprises: A stochastic frontier analysis (SFA). 2013 Cambridge Business & Economics Conference (pp. 1-35). Cambridge, United Kingdom: Cambridge University.


This study employs a stochastic frontier analysis (SFA) and technical inefficiency effects model to predict the technical efficiency of 3,168 Thai manufacturing and exporting SMEs, analyze their returns to scale and key factors impacting on their technical efficiency. Analysis of cross-sectional data from a 2007 census of Thai manufacturing SMEs indicates that their average technical efficiency is approximately 69.72 percent, signifying a moderate level of technical inefficiency which is reducing potential output. With respect to each group of manufacturing and exporting SMEs, SMEs exporting to East Asia have a level of technical efficiency of 0.7081, followed by SMEs exporting to ASEAN (0.7038), North & South America (0.7005), OCEANIA (0.6979), South Asia (0.6828), Europe (0.6764), and Middle East & Africa (0.6679). Thai manufacturing and exporting SMEs extensively rely on labour rather than capital to increase their output, including almost all exporting SME groups, except those exporting to North & South America. Furthermore, the production of Thai manufacturing and exporting firms exhibit decreasing returns to scale (0.8837), including the production of SMEs exporting to ASEAN (0.9027), East Asia (0.9200), South Asia (0.7935), Europe (0.6487), North & South America (0.52118), and Middle East & Africa (0.7672). The production of Thai manufacturing SMEs exporting to Oceania, however, has increasing returns to scale (1.1965). The inefficiency effects model reveals that firm size, firm age, foreign ownership, location and government assistance are firm-specific factors that significantly affect the technical inefficiency of production. Finally, evidence-based policies are also provided to facilitate improvement in the technical efficiency performance of Thai manufacturing and exporting SMEs.

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