Are ERDF Devoted to Boosting ICT in SMEs Inefficient? Further Insights Through the Joint Use of DEA with SFA Models

Abstract

AbstractWe employ a three-stage data envelopment analysis (DEA) model coupled with Stochastic Frontier Analysis (SFA) by using data made freely available by the European Commission, to evaluate the procedural efficiency of 51 OPs from 16 countries committed to fostering the adoption of Information and Communication Technologies (ICT) in small mid-sized enterprises (SMEs). We depart from the results obtained in the previous Chapter with two DEA models, specifically the Slack Based-Measure (SBM) and the Weighted Russel Directional Distance (WRDD) model. Firstly, we adjust the input and output factors through the SFA by removing the influence of environmental factors and statistical noise. Secondly, we instantiate the previous DEA models with adjusted factors, to compute new efficiency factors. All in all, we observed that by removing these contextual effects, nearly 27% of the OPs (14) vs. 30% of the OPs (16) using the SBM and the WRDD approaches, respectively, achieved efficient procedural outcomes, compared to 20 percent (10) without the consideration of these factors. The OP “Multi-regional Spain - ERDF” is commonly considered a benchmark regardless of the model and contextual environment. The ‘number of operations supported’ is the measure that necessitates more consideration, with or without the elimination of environmental factors, irrespective of the DEA model used. Our findings imply that more developed areas with a higher number of ICT specialists tend to have lower use of ERDF funds committed to promoting ICT adoption in SMEs. These findings might be attributable to administrative practices and SMEs’ failure to manage the complicated technicalities involved in submitting and executing European Regional Development Fund (ERDF) project proposals. As a result, it is critical to provide the extra help that reduces managerial requirements while also meeting the demands of SMEs.