Efficiency Analysis of Bangladeshi Manufacturing Firms Using Data Envelopment Analysis

Efficiency analysis is very useful and important to measure the performance of the firms in competitive market of growingly developing country like Bangladesh. The more efficient firms, the decision making units (DMUs) are generally referred for improvement termed as benchmarking units. This study worked with the data taken from the Enterprise Survey website (funded by the World Bank) and only manufacturing firms (n = 1007) are considered. Efficiency scores were obtained using Data Envelopment Analysis (DEA), non-parametric approach to measure efficiency. Output oriented DEA was applied here as we wanted to maximize our output ‘total sales’. 29 firms were found efficient under variable returns to scale (VRS) assumption. Reasons behind the inefficiency of the firms were explored after that and the firm size, manager's experience in respective sector, annual losses due to power outage, number of production workers etc were found as significant determinants of (in)efficiency scores, as expected, at different significance levels.

Keywords:

Efficiency analysis , Variable returns to scale , Competitive market , Enterprise Survey