Sten Thore

DEA of Financial Statements Data: The U.S. Computer Industry

DEA (data envelopment analysis) is a technique for determining the efficiencyfrontier (the envelope) to the inputs and outputs of a collection of individual corporations or other productive units. DEA is here employed to estimate the intertemporal productive efficiency of U.S. computer manufactures, using financial data brought from earnings statements and balance sheets. The results indicate that a few corporations, including Apple Computer Inc., Compaq Computer Corp., and Seagate Technology were able to stay at the productivity efficiency frontier throughout the time period investigated. But not all successful corporations did; sometimes subefficiency (=disequilibrium) actually goes together with very rapid growth. A new Malmquist type productivity index is calculated for each corporation, measuring shifts of the estimated intertemporal efficiency frontier.

DEA and the management of the product cycle: the U.S. computer industry

The method of Data Envelopment Analysis (DEA) is applied to rank the efficiency of U.S. computer companies during a 10-yr period. To reflect the dynamic setting of the computer industry, the inputs include investment in real capital and expenditures on RD the outputs are sales revenues, profits, and market capitalization. We develop a procedure for studying the time path of the observed DEA ratings of a high tech company over its product cycles. The empirical observations confirm the key relationship between efficiency and the product cycle. Since computer companies differ greatly in their success in managing their product cycles, they will also show quite different efficiency results. A few companies, like Apple and Compaq, manufacturing products with long and sustained cycles, were consistently located at the efficiency frontier. But most companies, spending heavily to bring on line a stream of innovative products, were inefficient.

Productive Efficiency under Capitalism and State Socialism: An Empirical Inquiry Using Chance-Constrained Data Envelopment Analysis

In this paper we undertake a comparison of the productive efficiency of a set of West European market economies and a set of East European planned economies. We employ the techniques of chance-constrained data envelopment analysis to conduct the comparison. These techniques are particularly appropriate when the performance of producers depends on their ability to make resource allocation decisions in the presence of technological and market uncertainties. We find the market economies to have been much more efficient in their allocation of resources.

Restricted best practice selection in DEA: An overview with a case study evaluating the socio-economic performance of nations

We discuss modifications in the concept of efficiency that occur in Data Envelopment Analysis when best practice selection is subjected to additional constraints reflecting institutional circumstances, externalities, equity considerations or other extraneous information. Such additional constraints restrict the feasible production possibility set on the envelopment side problem. We provide an overview of constraints that may be present on the envelopment side; some of them mimic the well-known cone-ratio and assurance region models on the multiplier side problem. The discussion is mainly in terms of policy-based constraints that are external to the physical input-output relationships and instead reflect the institutional setting of the efficiency rankings, including considerations of the economic and social policy. A numerical example which rates the socio-economic performance of both developed and developing nations is provided to illustrate our model developments.

The Economic and Social Performance of Nations: Efficiency and Returns to Scale

Abstract The authors, who earlier have applied data envelopment analysis to rank the economic performance of nations, propose to extend the calculations to take account of social variables such as education, health, and welfare policy as well. An empirical application is presented, rating 72 developed and developing countries by their economic and social performance during the time period 1970 to 1985. For each country, the efficiency rating and also a measure of returns scale—increasing, constant, or decreasing returns to scale (RTS) are calculated. The frequency of alternate optima, leaving the returns of scale indeterminate, is examined. For nations with increasing RTS, continued long-run growth of both GNP and social performance is indicated. For countries with decreasing RTS, a slowing down of both GNP and social performance is indicated. The data for countries exhibiting constant RTS is further investigated using more detailed RTS analysis tools and, for some of these countries, we show how the constant RTS characterization can be highly sensitive to changes in the data.

Strong legacies and weak markets : Bulgarian State-owned enterprises during early transition

The authors examine the factors affecting the performance of State-owned enterprises (SOEs) during early transition to a market economy. Data come from a longitudinal study of a representative sample of Bulgarian SOEs for the period from 1989 (the last year under communism) to 1993 (three years after major macroeconomic shifts). They investigate how changes in authority structure, work organization, technology, marketing strategy, and organizational boundaries during these years affected organizational performance in 1993. They also assess the degree of path dependence in performance and the role of competitive industry conditions. Numerous organizational changes made by SOEs during early transition had little effect on performance. Yet organizational performance from 1989 to 1993 was highly path-dependent, although this dependence was mediated by the competitive conditions : stronger markets displayed less path dependence. Overall the results favor the interpretations derived from selected neo-institutional and ecological perspectives of organizational sociology over neoclassical economic interpretations

Chance-constrained activity analysis

Abstract The methods of activity analysis (Koopmans [6,7]) are re-examined in the presence of technological uncertainty. In particular, such uncertainty arises when new emerging technologies are employed in the production process and/or when new product designs are being developed. Both input coefficients and output coefficients may be uncertain. If activity levels are to be determined and fixed a priori, one may not be able to require in advance that total output suffice to cover total demand. (Indeed, demand itself may also be uncertain.) Instead, the requirement is written as a chance-constraint, to hold on some predetermined probability level only. The purpose of the present note is to discuss the economic properties of the resulting optimal solution. The certainty equivalent of the chance-constrained program and the corresponding Kuhn-Tucker conditions are written down. At the point of optimum, each producer will hold some inventories of finished goods as a contingency against variation in the output coefficients and in demand. Equilibrium prices will suffice to provide each activity some expected positive profit (an explicit formula for the calculation of the magnitude of this profit is provided). In choosing between several risky activities, each producer may attempt to establish an optimal portfolio of activities, providing a trade-off between expected cost and risk. The nature of an emerging theory of activity portfolios, developed along the lines of standard concepts in financial portfolio analysis, is indicated.

Life cycle activity analysis: logistics and environmental policies for bottled water in Portugal

Abstract. An innovative mathematical programming decision support model –Life Cycle Activity Analysis (LCAA)– is presented, integrating considerations of optimal allocations of resources and impacts upon the environment during the life cycle of products. LCAA is based on the classical formulation of activity analysis and on the life cycle assessment framework. The concept of linear activities is extended to embrace mass and energy fluxes over the entire life cycle of products including their environmental impacts. Special attention is given to the presence of loops in the product chains, such as those occurring when materials/products are recovered (reused, recycled.). An application brought from the Portuguese bottled water industry is described. The model features alternative activities for production technologies and product recovery strategies and permits the joint consideration of monetary costs and environmental burdens. The results obtained under five scenarios, including distinct disposal strategies and environmental constraints, are discussed.Zusammenfassung. In diesem Beitrag wird ein innovatives mathematisches Entscheidungsunterstützungsmodell – die Life Cycle Activity Analysis (LCAA) – präsentiert, welches die optimale Allokation von Ressourcen und Auswirkungen auf die Umwelt während des Lebenszyklusses eines Produktes beinhaltet. LCAA basiert auf der klassischen Formulierung der Aktivitätsanalyse und auf dem methodischen Gerüst des Life Cycle Assessments. Das Konzept der linearen Aktivitätsanalyse wird erweitert, um Massen- und Energieflüsse während des gesamten Produktlebenszyklusses sowie deren Auswirkungen auf die Umwelt einbezogen. Eine besondere Aufmerksamkeit wird auf bestehende Zyklen in Prozessketten gelegt, die bei der Wiederverwendung / Verwertung von Materialien/Produkten auftreten. Es eine Anwendung aus der portugiesischen Flaschenwasser-Industrie vorgestellt. Das Modell zeichnet sich durch verschiedene alternative Aktivitäten für Produktionstechnologien und Wiederverwendungsstrategien aus und erlaubt die gleichzeitige Betrachtung von monetären Kosten und Umweltbelastungen. Die Ergebnisse, die aus fünf Szenarien zu verschiedenen Entsorgungsstrategien und Umweltschutzrestriktionen gewonnen werden, werden diskutiert.

Spatial Market Policy Modeling with Goal Targets

In this paper we show how the theory of variational inequalities can be applied to the formulation, qualitative analysis, and computation of a new competitive spatial market model in the presence of goal targets. The model allows the decision maker to impose supply goals at production locations, demand goals at consumption locations, and transportation goals between supply and demand locations, along with associated penalties for failure to comply. This work may be viewed as a contribution to the growing literature on the development of mathematical methodologies for policy modeling.

Economies of Scale in the US Computer Industry: An Empirical Investigation Using Data Envelopment Analysis

Up to recently, economists have had no good tools to measure the returns to scale of individual corporations in an industry. Data envelopment analysis (DEA) is a linear programming technique for determining the efficiency frontier (the envelope) to the inputs and outputs of a collection of individual corporations or other productive units. While DEA offers an avenue for calculating the returns to scale of individual corporations, the approach has been riddled by mathematical complications arising from the possibility of alternate optima. The present paper develops theory for calculating the entire range of these alternate optima. Furthermore, in a quite ambitions empirical application, DEA is employed to determine the time path of returns to scale of all publicly held U.S. computer companies over the time period 1980–1991. For the great majority of companies, a unique time path is obtained; only in less than 4 percent of the linear programming calculations is an entire range of alternate optima obtained. The results indicate that the computer industry was polarized into two camps: large aging corporations with decreasing returns to scale, and swarms of small upstart companies with advanced technology exhibiting increasing returns to scale.