Efficiency, technical progress, and best practice in Chinese state enterprises (1980–1994)

Abstract

Abstract:In spite of rapid economic growth and swift structural change during the last two decades, China's industrial reform is far from complete, especially with regard to state enterprises (SOEs). Although troubled with huge financial losses, heavy debt, and substantial over-staffing, SOEs will continue to play a crucial part in the government policy to maintain social stability and economic growth in China. This study, based on samples of about 700 state enterprises during 1980-94, investigates productivity performance of the SOEs using Data Envelopment Analysis and Malmquist Index. Our empirical results show that average technical efficiency had been low among the sample SOEs. Considerable productivity growth was found, but it was mainly accomplished through technical progress rather than efficiency improvement. Regression analyses indicate that wage incentives and education had positive impacts on productivity growth, while large scale was an important determinant of whether an SOE was applying best practice technology. It is also shown that large SOEs were more likely to generate technical progress. These findings are consistent with the industrial structural adjustment program initiated by the government in 1994, which has focused on improving productive efficiency via redundancies and technology upgrading, and on building its best SOEs into conglomerates.

Technological regimes, Schumpeterian patterns of innovation and firm-level productivity growth

“…These results are in line with previous studies exploring the determinants of efficiency change at the enterprise level (Zheng et al, 2003).…”

“…We make use of frontier production function methods (data envelopment analysis) to decompose the growth of total factor productivity (TFP) into two distinct components: technical progress and technical efficiency (Färe et al 1994;Perelman, 1995;Zheng et al, 2003). The former is associated with changes in the best-practice production frontier, whereas the latter with other productivity changes, such as learning by doing, improved managerial practices, and change in the efficiency with which an existing technology is applied.…”

The Inequality of the Provinces in China: A Productivity Analysis

“…This is consistent with the findings of previous studies, e.g. [7], [8], [3]. However, government should further encourage the innovation of new technologies in the production process as the adoption of technologies from the foreign countries does not lead to a promising long-term growth [3].…”

China: A New Model for Growth and Development

“…Like TFP, this indicates that improvements in China's GTFP have resulted from technical change rather than efficiency improvements, which is consistent with findings based on traditional measures (e.g., Wu 1995 andZheng et al 2003). Indeed, at this aggregate industry level, there appears to have been a backwards step in terms of latter (indicated by EI< 1, or the negative growth rate seen in Table 12.2).…”