Technical efficiency of small-scaled manufacturing enterprises in six different sectors in northern Vietnam

Dinh, H.; Nguyen, D.; Tran, T.; Tran, Q.; Tran, V.

Abstract: This paper examines the technical efficiency of small-scale manufacturing enterprises in Vietnam. The research uses primary data from a survey from June, 2019 to August, 2019 with 321 observations of six subsectors, including Textile, Garment; Building materials; Vegetable, Fruit and Bulb; Manufacture of Steel; Furniture Manufacturing and Food Processing. The research’s results show that the mean technical efficiency was 71.26 percent. However, there are considerable differences between sub-sectors ranging from 55.97 percent to 95.97 percent. The above mentioned results indicate that with the same level of inputs, Vietnamese small size enterprises can increase the present level of output by 44.03 percent; 38.05 percent; 30.92 percent; 26.07 percent; 21.05 percent and 4.08 percent for the sectors of Food Processing, Building Material; Textile, Garment; Vegetable, Fruit and Bulb; Manufacture of Steel and Furniture Manufacturing, respectively. The estimated results further suggest that manufacturing small-scale enterprise in Vietnam should improve their technology, labor quality and the initiative of input materials, especially, the sectors of Textile, Garment; Building Materials and Food Processing in order to move the production frontier upward as their technical efficiency are maintaining at low level.

How to cite this paper

        APA: Dinh, H., Nguyen, D., Tran, T., Tran, Q & Tran, V. (2020). Technical efficiency of small-scaled manufacturing enterprises in six different sectors in northern Vietnam. Management Science Letters, 10(14), 3433-3444.
    

        Chicago/Turabian: Dinh, H., Nguyen, D., Tran, T., Tran, Q & Tran, V. 2020. "Technical efficiency of small-scaled manufacturing enterprises in six different sectors in northern Vietnam." Management Science Letters 10, no. 14 (2020): 3433-3444.
    

        AMA: Dinh, H., Nguyen, D., Tran, T., Tran, Q & Tran, V. Technical efficiency of small-scaled manufacturing enterprises in six different sectors in northern Vietnam. Management Science Letters. 2020;10(14):3433-3444.
    

References

Abegaz, M. (2013). Total factor productivity and technical efficiency in the Ethiopian manufacturing sector. EDRI Work-ing Paper 10, Ethiopian Development Research Institute, Addis Ababa, Ethiopia.
Aggrey, N., Eliab, L., & Shitundu, J. (2010). Human capital and labor productivity in East African manufacturing firms. Current Research Journal of Economic Theory 2(2), 48-54.
Aigner, D. J., Lovell, C. A. K. & Schmidt, P. (1977). Formulation and estimation of stochastic frontier production function Models. Journal of Econometrics 6(1), 21-37.
Alvarez, R. & Crespi, G. (2003). Determinants of technical efficiency in small firms. Small Business Economics, 20(3), 233-244.
Asakawa, K., Nakamura, H., & Sawada, N. (2010). Firms' open innovation policies, laboratories' external collaborations and laboratories' R&D performance. R&D Management, 40, 109–123.
Battese, G. E., & Corra, G. (1977). Estimation of a production frontier model with application to the pastoral zone of east-ern Australia. Australian Journal of Agricultural Economics, 21(3), 167-179.
Coelli, T. (1996). A Guide to FRONTIER Version 4.1: A Computer Program for Frontier Production Function Estimation. Centre for Efficiency and Productivity Analysis, Department of Econometrics, University of New England, Australia.
Coelli, T., Rao, D. S. P., & Battese, G. E. (2005). An Introduction to Efficiency and Productivity Analysis. New York: Springer.
Farrell, M. J. (1957). The Measurement of Productive Efficiency. Journal of the Royal Statistical Society. Series A (Gen-eral), 120(3), 253-290.
Ha, V. H., & Carlin, T. (2007). Ownership Structure and Determinants of Efficiency in Vietnam’s Industrial Sector, 2001-2005. Paper presented at the International Conference on Global Research in Business and Economics. December 27-29, First Hotel in Bangkok, Thailand.
Harvie, C., & Le, V. (2010). How do Vietnamese SMEs perform? Technical efficiency of SMEs in the manufacturing sec-tor and its sub-sectors. Korea and the World Economy, IX, 1-37. Korea: The Association of Korean Economic Studies, University of Incheon.
Hossain, M.A., & Karunaratne, N. D. (2004). Trade liberalisation and technical efficiency: Evidence from Bangladesh manufacturing industries. The Journal of Development Studies, 40(3), 87-114. DOI: 10.1080/0022038042000213210
International Labor Organization, 2018, Labour and social trends in Vietnam 2012 – 2017. Available online at https://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/---ilo-hanoi/documents/publication/wcms_626102.pdf
Kalirajan, K. P., & Shand, R. T. (1999). Frontier production functions and technical efficiency measures. Journal of Eco-nomic Surveys, 13(2), 149-172.
Hailu, K. B., & Tanaka, M. (2015). A “true” random effect stochastic frontier analysis for technical efficiency and hetero-geneity: Evidence from manufacturing firms in Ethiopia. Economic Modelling 50, 179–192.
Kieu, T. T, (2019). Situations and solution to improve the competitiveness of Vietnamese enterprises in the current devel-opment period. Industry and Trade Magazine (in Vietnamese). Available at: http://www.tapchicongthuong.vn/bai-viet/thuc-trang-va-giai-phap-nang-cao-nang-luc-canh-tranh-cua-doanh-nghiep-viet-nam-trong-giai-doan-hien-nay-63621.htm.
Kinda, T., Plane, P., & Véganzonès-Varoudakis, M. A. (2011). Firm productivity and investment climate in developing countries: How does Middle East and North Africa manufacturing perform. The Developing Economies 49(4), 429–62.
Kumbhakar, S., & Lovell, C. A. K. (2003). Stochastic Frontier Analysis. Cambridge U.K.: Cambridge University Press.
Le, A. V. (2017). Innovating policies to support small and medium enterprises to improve competitiveness. Institute for Brand and Competitiveness Strategy – BCSI.
Le, V., Vu, X. B., and Nghiem, S. (2018). Technical efficiency of small and medium manufacturing firms in Vietnam: A stochastic meta-frontier analysis. Economic Analysis and Policy, (59), 84-91.
Lundvall, K., & Battese, G. E. (2000). Firm size, age and efficiency: Evidence from Kenyan manufacturing firms. The Journal of Development Studies, 36(3), 146-163. DOI: 10.1080/00220380008422632
Meeusen, W., & Van den Broeck, J. (1977). Efficiency estimation from CobbDouglas production functions with composed error. International Economic Review, 18(2), 435-444.
Murillo-Zamorano, L. R. (2004). Economic efficiency and frontier techniques. Journal of Economic Surveys, 18(1), 33-77.
Nguyen, K. M., Giang, T. L., & Bach, N. T. (2007). Technical efficiency of the small and medium manufacturing enter-prises in Vietnam. The Korean Economic Review, 23(1), 187-221.
Nguyen, K. M., & Truong, T. V. (2007). A Non-parametric Analysis of Efficiency for Industrial Firms in Vietnam. The Publishing House of Social Labor, 1-30. Hanoi, Vietnam.
Nguyen, T., To, T. T., Vu, H. D.,& Oostendorp, R. H. (2005). Productivity Analysis for Vietnam’s Textile and Garment Industry. Viet Nam Economic Research Network (VERN) - Phase I. Institute for Market and Price Research, Hanoi, Vi-etnam.
Oguchi, N., Karim, A. A., & Amdzah, N. A. (2006). Productivity of Large Firms and SMEs of Malaysian Manufacturing. Tokyo, Senshu University.
Page, J. M. (1984). Firm size and technical efficiency: Applications of production frontiers to Indian survey data. Journal of Development Economics 16, 129-152.
Pham, H. T., Dao, T. L., & Reilly, B. (2009). Technical efficiency in the Vietnamese manufacturing sector. Journal of In-ternational Development, Early Online View, Published Online: 14 Jun 2009.
Rand, J., Tarp, F., Nguyen, H. D., & Dao, Q. V. (2004). Documentation of the Small and Medium Scale Enterprise (SME) Survey in Vietnam for the Year 2002, Hanoi, Vietnam.
Sehgal, S., & Sharma, S. (2011). Total factor productivity of the manufacturing sector in India: a regional analysis for the State of Haryana. Economic Journal of Development Issues, 13,97–118.
Storey, D. J. (1990). Firm Performance and Size in Acs, Z. J. and Audretsch, D. B. (Eds.) The Economics of Small Firms: A European Challenge. Dordrecht and Boston: Kluwer Academic Publishers: 43-50.
Charoenrat, T., Harvie, C., & Amornkitvikai, Y. (2013). Thai manufacturing small and medium-sized enterprise technical efficiency: Evidence from firm-level industrial census data. Journal of Asian Economics 27, 42–56.
Tran, T. B. (2008). Productivity, Efficiency and Institutions: Economic Reforms and Non-state Manufacturing Firm Per-formance in Vietnam. Crawford School of Economics and Government. Ph.D. thesis. Canberra, Australian National University.
Tran, T. B., Grafton, R. Q., & Kompas, T. (2008). Firm efficiency in a transitional economy: Evidence from Vietnam. Asian Economic Journal, 22(1), 47-66.
Tybout, J. R. (2000). Manufacturing firms in developing countries: How well do they do, and why?. Journal of Economic Literature, 38(1), 11-44.
Vu, Q. N. (2003). Technical efficiency of industrial state-owned enterprises in Vietnam. Asian Economic Journal, 17(1), 87-101.
Vu, T. H., & Phuong, T. (2019). Changes in Vietnam - China trade in the context of China’s economic slowdown: Some Analysis and implications. VNU Journal of Science: Economics and Business. 35.10.25073/2588-1108/vnueab.4229.
Wiboonchutikula, P. (2002). Small and medium enterprises in Thailand: Recent trends. Small Business Economics, 18(1-3), 213-226.
Yang, S. F., Chen, K. M., & Huang, T. H. (2013). Outward foreign direct investment and technical efficiency: Evidence from Taiwan’s manufacturing firms. Journal of Asian Economics 27, 7–17.
Vietnam Chamber of Commerce and Industry (VCCI), 2019. Report of Vietnam Chamber of Commerce and Industry (VCCI), 2019. Available at: https://en.vcci.com.vn/report-on-summary-and-evaluation-of-recommendations-settlement-of-the-business-community-for-the-period-2016-2019