Estimating a technical inefficiency effects model for Thai manufacturing and exporting enterprises (SMEs): a stochastic frontier (SFA) and data envelopment analysis (DEA) approach
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This paper employs a stochastic frontier (SFA) and data envelopment analysis (DEA) to analyse inefficiency effect models for 3,894 Thai manufacturing and exporting small and medium size enterprises (SMEs), using 2007 Thai Industrial Census data. Thai manufacturing and exporting SMEs experience decreasing returns to scale even though their technical efficiency in production is found to be relatively high. Results from estimations using both approaches also reveal that firm age, medium-sized enterprises compared with small-sized enterprises, firm location in Bangkok, foreign investment and government assistance are significantly and positively related to firm technical efficiency. Focusing on the technical efficiency of SMEs exporting to different destinations, those exporting to OCEANIA perform the best, followed by SMEs exporting to ASEAN, East Asia, and North and South America, while SMEs exporting to Europe experience no significant effect upon their technical efficiency from doing so, where SMEs exporting to the rest of the world is the base exporting SME group. The results also reveal that SMEs in the chemicals and related products sector perform the best, followed by SMEs in the machinery and transport equipment sector, where the miscellaneous manufactured articles sector is used as the base sector. The manufactured goods sector and food, beverages and tobacco sector are also found to perform better than the miscellaneous manufactured articles sector. Finally, the paper also provides useful evidence-based policy recommendations aimed at enhancing the technical efficiency and competitiveness of Thai manufacturing and exporting SMEs.