The Performance of Thai Manufacturing SMEs: Data Envelopment Analysis (DEA) Approach

Abstract

This study applies a data envelopment analysis (DEA) approach and a two-limit Tobit model to measure the technical efficiency of Thai manufacturing small and medium enterprises (SMEs) and examine firm-specific factors contributing to it by using firm-level industrial censuses data in 1997 and 2007. The empirical results reveal that the overall average technical efficiency is relatively low, which can potentially reduce their output contribution. Empirical results also indicate that firm size, firm age, skilled labour, location, type of manufacturing ownerships, cooperatives, foreign investment and exports are important firm-specific factors contributing to the technical efficiency of Thai manufacturing SMEs. Therefore, specific policies are required to improve the technical efficiency of SMEs and these include easier access to financial services, credit facilities, equity in terms of the political operation, educational system, extensive infrastructural development and technological upgrading, marketing and management.