Technical efficiency in Malaysian textile manufacturing industry: A stochastic frontier analysis (SFA) approach

Mohd Fahmy-Abdullah, Lai Wei Sieng, Hamdan Muhammad Isa

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

The textile industry is a targeted industry under the Third Industrial Masterplan (IMP3) as it is the Malaysian 10th largest export revenue source. However, the recent main concern is on performance of workers and rapid technological development in the supply chain which demands the industry to demonstrate a high level of technical efficiency in order to address the emergence of new operations and new technologies that ultimately enhance the momentum of the country's economic growth. Therefore, this article aims to measure the level of efficiency and analyze the factors of technical inefficiency of the textile manufacturing industry in 2015. The determinants include capital-labor ratios, training expenses, educational level ratios, wage rates, information and communication technology expenses, firm size and research and development expenditure. This article uses data of 1010 firms based on the latest census of 2015 obtained from the Department of Statistics, Malaysia. The Stochastic Frontier Analysis (SFA) approach is used. The results show that the firms' overall technical efficiency level is high. The determinants of inefficiencies, i.e. the ratio of capital-labor, the level of secondary and high education, wage and communication costs and information technology can reduce the inefficiency level of firms. The basic implication is that the textile manufacturing industry needs to provide a better approach to high technology production that is in line with the workforce efficiency level, emphasis on school years, increase employee motivation by increasing rewards and expanding cooperation with local and international parties and appointing experts in the industry of textile manufacturing.

Original languageEnglish
Pages (from-to)407-419
Number of pages13
JournalInternational Journal of Economics and Management
Volume12
Issue number2
Publication statusPublished - 1 Jan 2018

Fingerprint

Technical efficiency
Stochastic frontier analysis
Manufacturing industries
Industry
Inefficiency
Expenses
Labor
Factors
Workforce
Momentum
Expenditure
High technology
Supply chain
Educational level
Wages
Communication cost
Education
Census
Wage rate
Reward

Keywords

  • Stochastic Frontier Analysis
  • Technical efficiency
  • Textile manufacturing industry

ASJC Scopus subject areas

  • Business and International Management
  • Economics, Econometrics and Finance(all)
  • Strategy and Management

Cite this

Technical efficiency in Malaysian textile manufacturing industry : A stochastic frontier analysis (SFA) approach. / Fahmy-Abdullah, Mohd; Wei Sieng, Lai; Isa, Hamdan Muhammad.

In: International Journal of Economics and Management, Vol. 12, No. 2, 01.01.2018, p. 407-419.

Research output: Contribution to journalArticle

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