The Persistence of Efficiency

Expert Systems with Applications, Volume 40, Issue 14, 15 October 2013, Pages 5661–5672

Posted: 10 Jan 2015

See all articles by Geraint Johnes

Geraint Johnes

Lancaster University - Management School; Lancaster University

Jill Johnes

University of Huddersfield

Date Written: 2013

Abstract

Profits can persist in the resource-based view (RBV) of the firm because of heterogeneity of inputs combined with resource immobility. The firm-efficiency interpretation of the RBV posits that heterogeneity in, for example, technology or know-how, leads to inter-firm efficiency differences which can persist because of imperfect imitability. Thus the persistence of efficiency leads to the persistence of profitability. There has been no empirical research into the firm-efficiency view, and this paper therefore fills that gap by utilizing a panel of 4280 firms in the manufacturing sector over the period 1983-2003. Efficiency scores are derived using data envelopment analysis (DEA) and these are then modelled in a random parameter framework where one determinant of current period efficiency is the firm’s own lagged efficiency. The estimated coefficient of efficiency persistence is found to be around 0.7, thereby offering support for the firm-efficiency view, and this varies by country and by industry.

Keywords: Resource-based view, Firm efficiency, Frontier methods, Business strategy, Manufacturing sector

Suggested Citation

Johnes, Geraint and Johnes, Jill, The Persistence of Efficiency (2013). Expert Systems with Applications, Volume 40, Issue 14, 15 October 2013, Pages 5661–5672 . Available at SSRN: https://ssrn.com/abstract=2546755

Geraint Johnes

Lancaster University - Management School ( email )

Bailrigg
Lancaster, LA1 4YX
United Kingdom
+44 1524 594215 (Phone)
+44 1524 594244 (Fax)

Lancaster University ( email )

Lancaster LA1 4YX
United Kingdom

Jill Johnes (Contact Author)

University of Huddersfield ( email )

Queensgate
Huddersfield HD1 3DH
United Kingdom

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