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Efficiency measurement of the construction industry in Taiwan: a stochastic frontier cost function approach

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  • Ren-Jye Dzeng
  • Jih-Shong Wu

Abstract

Construction firms require a large cash flow, thereby creating a significant financial leverage. Therefore, identifying a highly effective cost efficiency model is essential for construction firms, especially under the pressure of competition in today’s global market. This research used stochastic frontier analysis (SFA) to model and measure the cost efficiency of construction firms in Taiwan, and to investigate the relationships between input resources and cost efficiency. The main findings include: (1) subcontracting reduces labour capacity; (2) larger firms can be more cost efficient; (3) appropriate financial leverage increases cost efficiency and capital; and (4) reducing equipment costs increases cost efficiency. These findings can help construction firms to strategically adjust the management of their firm and improve cost efficiency.

Suggested Citation

  • Ren-Jye Dzeng & Jih-Shong Wu, 2013. "Efficiency measurement of the construction industry in Taiwan: a stochastic frontier cost function approach," Construction Management and Economics, Taylor & Francis Journals, vol. 31(4), pages 335-344, April.
    • Handle: RePEc:taf:conmgt:v:31:y:2013:i:4:p:335-344
    DOI: 10.1080/01446193.2013.787162
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    References listed on IDEAS

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    1. Nguyen, Khac Minh & Giang, Thanh Long, 2005. "Efficiency of Construction Firms in Vietnam," MPRA Paper 968, University Library of Munich, Germany, revised Nov 2006.
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    Cited by:

    1. Kangile, Rajabu Joseph, 2015. "Efficiency In Production By Smallholder Rice Farmers Under Cooperative Irrigation Schemes In Pwani And Morogoro Regions, Tanzania," Research Theses 265681, Collaborative Masters Program in Agricultural and Applied Economics.
    2. Joseph Kangile, Rajabu, 2015. "Efficiency in Production By Smallholder Rice Farmers Under Cooperative Irrigation Schemes in Pwani and Morogoro Regions, Tanzania," Research Theses 243447, Collaborative Masters Program in Agricultural and Applied Economics.
    3. Wei Tong Chen & Adiqa Kausar Kiani & Ming-Tsung Wu & Hew Cameron Merrett & Chih-Hsing Wang, 2023. "Comparison of the Technical Efficiency of Construction Industries—A Case Study of Taiwan and Mainland China," Sustainability, MDPI, vol. 15(2), pages 1-23, January.
    4. Makuya, V. & Ndyetabula, D. & Mpenda, Z., 2018. "cost efficiency of watermelon production in Tanzania," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277128, International Association of Agricultural Economists.

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