A New Input‐Oriented Plant Capacity Notion: Definition and Empirical Comparison

Abstract

Starting from the existing output‐oriented plant capacity measure, this paper proposes a new input‐oriented plant capacity measure. Furthermore, we empirically illustrate both input‐oriented and output‐oriented decompositions of technical efficiency integrating these technical concepts of capacity utilization. In particular, we pay attention to the impact of convexity of the technology on both input‐oriented and output‐oriented plant capacity measures.

Using COVID-19 mortality to select among hospital plant capacity models: An exploratory empirical application to Hubei province

“…Overall, these descriptive statistics demonstrate that C and NC results differ substantially (see also Walden and Tomberlin, 2010 ; Cesaroni et al., 2017 ; Kerstens et al., 2019a ). Otherwise, there is little evidence with regard to the pertinence of input-oriented versus output-oriented and SR versus LR plant capacity concepts; they seem to measure somewhat different realities.…”

“…In line with Cesaroni et al. (2017) , we also define SR input-oriented plant capacity utilization by a ratio of input efficiency measures, evaluated relative to a production technology targeting only at reducing variable inputs and an identical technology with a level of null outputs : where and are input efficiency measures aimed at reducing variable inputs for a given level of outputs or null outputs, respectively.…”

“…Then, two major innovations occurred in quick succession. First, Cesaroni et al. (2017) defined a new input-oriented concept of plant capacity utilization, using a pair of input-oriented efficiency measures with the same nonparametric frontier framework.…”

“… Walden and Tomberlin (2010) offer the first empirical illustration of the effect of convexity on the output-oriented plant capacity. Then Cesaroni et al. (2017) empirically compare output- and input-oriented plant capacity concepts and show that convexity has a powerful influence on both concepts in practice.…”

Estimating Capacity Utilization of Chinese State Farms

“…As the original idea of capacity relates to the output production, much of the literature focused on the output-oriented measures of capacity. However, Cesaroni et al [15] presented the input-oriented CU measures. Kerstens et al [16] further compared the output-and input-oriented measures under assumptions of convex and non-convex technologies.…”