An Assessment of Total Factor Productivity (TFP) of SME Business in Bangladesh using DEA based Malmquist Productivity Index (MPI)

  • WEI Jianguo Wuhan University of Technology
  • Md. Qamruzzaman Wuhan University of Technology
Keywords: Malmquist index, Total factor Productivity, Data evolvement analysis, Residual analysis

Abstract

For sustainable growth, SMEs play a dynamic role through creation of employment, increase of aggregate production, maximization of economic resources in the economy.  Considering SMEs impact on diversified area of economy, the subject matter of SMEs productivity draw intense attention for intense research over last decade. In Bangladesh, as developing country, SMEs contribution becoming significant for employment generation, reduce income inequalities and lead to export through maximization of production. The objective of this study to assess SMEs performance for the period from 2005 to 2014. Study measures productivity using Malmquist Productivity Index (MPI) having one outputs and three inputs.  We run regression analysis to identify residual by comparing expected output and an actual output having available inputs. Study result revealed that productivity index (MALM = 1) remains constant, but it is found that technical efficiency enhancement from 2010 to 2014, however overall efficiency declined by 2.6% as well. The residual analysis revealed no significant deviation between expecting output and actual output by using available inputs. This research outcome will give a glimpse about overall SME performance, which will induce researchers to go further in-depth analysis for bringing more insight for SME development. 

Downloads

Download data is not yet available.

Author Biographies

WEI Jianguo, Wuhan University of Technology

Professor, School of Economics, Wuhan University of Technology, CHINA

Md. Qamruzzaman, Wuhan University of Technology

Ph.D. Scholar, School of Economics, Wuhan University of Technology, CHINA

References

Aikaeli, J., Wellington, B., & Jehovaness, A. (2014). Efficiency of Small and Medium-Sized Enterprises in Liberia: The Case of Monrovia. International Journal of Commerce and Managemen, 3(3), 1-10.

Alauddin, M. Z. (2015). The Performance Of Sme Sector In Bangladesh: An Evaluative Study. International Journal of Small Business and Entrepreneurship Research, 2(1), 14-28.

Alias Radam, M. L. (2008). Technical Efficiency of Small and Medium Enterprise in Malaysia: A Stochastic Frontier Production Model. International Journal of Economics and Management, 5(2), 395-408.

Ayyagari, M., Beck, T., & Demirgüç-KunT, A. (2011). Small and Medium Enterprises across the Globe: A New Database (pp. 12-24). USA: World Bank Publication

Azrum, H., & Haq, E. (2016). Measuring the Efficiency of Turkish SMEs: A Data Envlovepment Analysis. International Journal of Economics and Finance, 4(1), 190-200.

Bangladesh Bank. (2017). SME financing reropt - 2017. Bangladesh Bangladesh

Banker, A. D., Charnes, W. W., Cooper, W., & Schinnar, A. P. (1984). A Bi-Extremal Principle for Frontire Estimation and Efficiency Evaluations. Management Science, 27, 1370-1382.

Bosri, R. (2016). SME Financing Practices in Bangladesh: Scenario and Challenges Evaluation. World Journal of Social Sciences, 6(2), 39 – 50.

Caves, D. W., Christensen, L. R., & Diewert, W. E. (1982). The economic theory of index numbers and the measurment of input, output and productivity. Econometrica (1), 1939-1414.

Chen, Y. (2003). A non-radial Malmquist Productivity Index with an illustrative illustrative application to Chinese major industries. International Journal of Business and Management, 1(2), 27-55.

Chowdhury, M. S., Islam, R., & Alam, Z. (2013). Constraints to the Development of Small and Medium Sized Enterprises in Bangladesh: An Empirical Investigation. Australian Journal of Basic and Applied Sciences, 7(8), 690-696.

Coelli, T. J., Rao, D. P., & Battese, G. (1998). An Introduction to Efficiency and Productivity Analysis. Boston: Kluwer Academic Publishers.

Danijela Marjanovic, Z. S. (2014). Data Envelopment Analysis Application for Assessing the Efficacy of Msp. Paper presented at the 8th International Quality Conference

Ekpenyong, D. B. (1992). Small and medium-scale enterprises in Nigeria: Their characteristics, problems and sources of finance. African Economic Research Consortium, 1(2), 66-83.

Fare, R. S., Grosskopf, M., Norris., & Zhang, Z. (1994). Productivity Growth, Technical Progress and Efficiency Changes in Industrialised Countries. American Economic Review, 2(1), 25-45.

Farrell, M. J. (1957). The Measurement of Productive Efficiency, 5(1), 253-290.

Heilbrunn, S., Rozenes, S., & Vitner, G. (2011). A "DEA" Based Taxonomy to Map Successful SMEs. International Journal of Business and Social Science, 3(1), 323-241.

Hoque, M. Z., Sultana, N., & Thalil, T. (2016). Credit rationing’s determinants of Small and Medium Enterprises (SMEs) in Chittagong, Bangladesh. Journal of Global Entrepreneurship Research, 6(1), 1-23.

Islam, M. A., Yousuf, S., & Rahman, M. I. (2014). SME Financing in Bangladesh: A Comparative Analysis of Conventional and Islamic Banks. Journal of Islamic Banking and Finance, 2(1), 79-92.

Kok, J. d., Vroonhof, P., Verhoeven, W., Timmermans, N., Kwaak, T., Snijders, J., & Westhof, F. (2011). Do SMEs Create More? : EIM Business and Policy Research.

Konrad, Adenauer, & Stiftung. (2015). Strengthening Small and Medium Enterprises in Jordan (pp. 1-22): Jordaninan Young Economists Society

Malmquist, S. (1953). Index numbers and indifference surfaces. Trabajos de Estadistica, 5(3), 209-242.

Prusa, J. (2009). The Most Efficient Czech SME Sectors: An Application of Robust Data Envelopment Analysis. Prague Institute of Economic Studies, Charles University in Prague.

Purwanto, D. M. (2014). Efficiency of Small- and Medium-sized Tofu Enterprises (SME) in Salatiga using Data Envelopment Analysis (DEA). International Journal of Computer Applications, 2(1), 44-50.

Qamruzzaman, M. (2015). Productivity and Performance Evaluation of SME Sector in Bangladesh: Evidence from the Historical Data. Journal of Islamic Finance and Business Research, 2(3), 14-22.

Rahmah Ismail, Z. M. (2014). Determinant of Technical Efficiency of Small and Medium Enterprises in Malaysian Manufacturing Firms. Prosiding Perkem, 1(1), 665-675.

Rahmatullah, N. M., Mukul, A. Z. A., & Islam, M. T. (2014). Visiting SME financing Industry in Bangladesh Review of Knowledge Economy,, 1(1), 6-20.

Rashid, M. M. (2012). Proposed Research Direction For Sustainable Smes In Bangladesh. . Bangladesh Research Publications Journal, 2(3), 317-329.

Reaz, U., & Kanti, B. (2013). Factors Affect the Success of SME in Bangladesh: Evidence from Khulna City. Journal of Management and Sustainability, 3(3), 166-172.

Temtime, Z. T., & Pansiri, J. (2004). Small Business Critical Success/Failure Factors in Developing Economies: Some Evidences from Botswana. American Journal of Applied Science 1(1), 18-25.

Uddin, M. T. (2014). A Study on Financing of SME’s in Bangladesh. Journal of Economics and Sustainable Development, 5(11), 161-168.

Workineh, M. (2016). Factors Affecting the Development of Micro and Small scale Manufacturing Enterprises in Addis Ababa: The Case of Kirkos Sub-city. (Master of Business Administration), ST. MARY’S UNIVERSITY, Addis Ababa, Ethiopia. (0059/2006)

--0--

Published
2017-06-17
How to Cite
Jianguo, W. and Qamruzzaman, M. (2017) “An Assessment of Total Factor Productivity (TFP) of SME Business in Bangladesh using DEA based Malmquist Productivity Index (MPI)”, ABC Journal of Advanced Research, 6(1), pp. 31-40. Available at: https://i-proclaim.my/journals/index.php/abcjar/article/view/21 (Accessed: 22July2019).
Bookmark and Share