Comparing Efficiency Across Various Groups of Firms: A Meta-Frontier Approach

TL;DRAbstract

In this chapter we have classified firms according to their strategies and structures and compared the efficiency at two different levels viz., the global and local frontiers. The global frontier is constructed by taking into consideration all the firms in the sample and the local frontier by considering only the firms from the group. A cross comparison of the efficiency at two different levels enable us to examine whether the inefficiency arises due to firm specific intrinsic factors or due to its strategies or structure. The analysis reveals that firms undertaking R&D are gradually catching up with the global frontier. We also notice that firms producing only finished products or formulation are by themselves efficient; however, by integrating with the downstream raw-material industry additional efficiency gain is also possible. Similarly for firms selling their product only in the domestic market an additional efficiency gain is possible by changing their strategy and selling their

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