Estimating Factors Affecting Technical Efficiency in Indian Manufacturing Sector

Abstract

Existing studies could not estimate the technical efficiency (TE) of firms and it’s affecting factors in the Indian manufacturing sector. So, the present study examines the TE of firms using a stochastic frontier production function approach. Thereupon,
it examines the impact of S&T and IPRs related factors on estimated TE of firms using a linear regression model. Estimated values of TE of firms show that most firms have a TE of 94%; thus, firms are efficient in producing surplus production in the
manufacturing sector. It is acclaimed that firms can improve production scale using more technological upgradation and advancement. Furthermore, empirical results indicate that process innovations of firms, quality certification of firm, firm acquired process/product patents, in-house R&D expertise of firms, public-technology support institutions of firms, proficiency to improve processes of firms, new or improved products of firms, waste management capabilities of firms, and skilled workforce of firms are appeared effective activities to increase the TE of firms. It is proposed that there is a requirement to increase R&D expenditure, a collaboration of industries with research academia, incentive to researchers and scientists to do extensive research in emerging sectors of technologies and appropriate financial support to firms to boost the growth of Indian manufacturing sector.