Firm-specific factors contributing to the technical inefficiency of Thai manufacturing SMEs: evidence from industrial censuses in 1997 and 2007
Thai SMEs are recognized as a core element to foster economic growth, employment and business establishments, exports. Despite SMEs obvious significance, they face several severe difficulties that act as obstacles to their further development. This study uses a stochastic frontier production function and technical inefficiency effects model to examine firm-specific factors affecting the technical inefficiency of Thai manufacturing SMEs and predict the technical efficiency of manufacturing SMEs, utilizing firm-level industrial census data in the period 1997 and 2007, classified into two aspects: By size of manufacturing SMEs (small and medium) and by sub-manufacturing sectors classified by SITC Revision 4. The empirical results of a stochastic frontier model highlighted that the overall average of technical efficiency in both periods is relative low and labour intensive, which can potentially reduce their output contribution. The technical inefficiency effects model revealed that firm size, firm age, skilled labour, location in a municipal and Bangkok areas, type of manufacturing ownerships, cooperatives, foreign investment and exports are likely to be important firm-specific factor to the technical efficiency. Therefore, specific policy implications to improve the technical efficiency are greater access to financial services, credit facilities, equity in terms of the political operation, educational system, extensive infrastructural development, and technological upgrading, marketing and management.