The adjustment-cost model of the firm: Duality and productive efficiency

Measuring productivity change accounting for adjustment costs: evidence from the food industry in the European Union

“…The same firms are observed at time t+1, and their inputs, outputs and investments are denoted as: (y t+1 , k t+1 , x t+1 , I t+1 ). The dynamic directional input distance function for time t is defined as follows (Kapelko et al 2014;Silva et al 2015):…”

Managerial and program inefficiency for European meat manufacturing firms: A dynamic multidirectional inefficiency analysis approach

“…Let us assume a set of j = 1,…,J firms using a vector of N variable inputs x = (x 1 ,…,x N ), a vector of F gross investments in quasi-fixed inputs I = (I 1 ,…,I F ), and a vector of F quasi-fixed inputs k = (k 1 ,…,k F ) to produce a vector of M outputs y = (y 1 ,…,y M ). The dynamic production technology transforms variable inputs and gross investments into outputs at a given level of quasi-fixed inputs and is defined as (see Kapelko et al 2014;Silva et al 2015): P ¼ ðx; I; y; kÞ : x; I can produce y; given k f g ð 1Þ…”

“…In particular, it allows for dynamic inefficiency analysis, linking the firms' production decisions over time through capital adjustment and accounting for adjustment costs of investments. Not accounting for dynamics of firms production decisions can lead to biased inefficiency measures especially when firms undertake large investments (Kapelko et al, 2014;Silva et al, 2015). Furthermore, the proposed approach enables for a proper analysis and comparison of inefficiency between groups of firms that are characterized by different technologies.…”

“…One group of studies within this line develop dynamic network models which take the view of multistage production systems (for example, Färe and Grosskopf 1996;Chen 2009;Fukuyama and Weber 2015). In the other group of studies, the firms' production decisions are linked over time through adjustment costs associated with changes in quasi-fixed factors of production Stefanou 2003, 2007;Kapelko et al 2014;Silva et al 2015) 3 . Previous studies did not consider the dynamics of firms production decisions when developing models for measuring the efficiency of groups of firms functioning under heterogeneous technologies.…”

“…Therefore, the main aim of the paper is to develop a dynamic production framework for making comparisons across groups of firms (program inefficiency) and within groups of firms (managerial inefficiency). The introduction of production dynamics in models of efficiency is based on Stefanou (2003, 2007) who estimate hyperbolic efficiency measures, and their further extensions to dynamic directional distance functions by Serra et al (2011), Kapelko et al (2014) and Silva et al (2015). Furthermore, this paper builds on the study of Kapelko and Oude Lansink (2017), who developed a dynamic multidirectional inefficiency model (dynamic MEA), but did not distinguish program inefficiency from managerial inefficiency 4 .…”