Scale directional distance function and its application to the measurement of eco-efficiency in the manufacturing sector

TY - JOUR

T1 - Scale directional distance function and its application to the measurement of eco-efficiency in the manufacturing sector

AU - Ramli, Noor Asiah

AU - Munisamy, Susila

AU - Arabi, Behrouz

PY - 2013/12

Y1 - 2013/12

N2 - Directional distance function (DDF) is a recognized technique for measuring efficiency while incorporating undesirable outputs. This approach allows for desirable outputs to be expanded while undesirable outputs are contracted simultaneously. A drawback of the DDF approach is that the direction vector to the production boundary is fixed arbitrarily, which may not provide the best efficiency measure. Therefore, this study extends the previous framework of efficiency analysis to introduce a new slacks-based measure of efficiency called the scale directional distance function (SDDF) approach. This new approach determines the optimal direction to the frontier for each unit of analysis and provides dissimilar expansion and contraction factors to achieve a more reasonable eco-efficiency score. This new approach is employed to measure the eco-efficiency of the Malaysian manufacturing sector. In addition, the paper demonstrates the use of the new approach to establish target values for the reduction/expansion of outputs in order for the inefficient DMUs to achieve full eco-efficiency. The results indicate that Melaka, Pulau Pinang, Negeri Sembilan, Sabah, Sarawak and Labuan have attained full eco-efficiency while Terengganu is the least eco-efficient. The overall eco-efficiency of the manufacturing sector in Malaysia is 80.5 % with wide variations across the states.

AB - Directional distance function (DDF) is a recognized technique for measuring efficiency while incorporating undesirable outputs. This approach allows for desirable outputs to be expanded while undesirable outputs are contracted simultaneously. A drawback of the DDF approach is that the direction vector to the production boundary is fixed arbitrarily, which may not provide the best efficiency measure. Therefore, this study extends the previous framework of efficiency analysis to introduce a new slacks-based measure of efficiency called the scale directional distance function (SDDF) approach. This new approach determines the optimal direction to the frontier for each unit of analysis and provides dissimilar expansion and contraction factors to achieve a more reasonable eco-efficiency score. This new approach is employed to measure the eco-efficiency of the Malaysian manufacturing sector. In addition, the paper demonstrates the use of the new approach to establish target values for the reduction/expansion of outputs in order for the inefficient DMUs to achieve full eco-efficiency. The results indicate that Melaka, Pulau Pinang, Negeri Sembilan, Sabah, Sarawak and Labuan have attained full eco-efficiency while Terengganu is the least eco-efficient. The overall eco-efficiency of the manufacturing sector in Malaysia is 80.5 % with wide variations across the states.

KW - Data envelopment analysis (DEA)

KW - Directional distance function (DDF)

KW - Eco-efficiency

KW - Scale directional distance function (SDDF)

KW - Undesirable output

UR - http://www.scopus.com/inward/record.url?scp=84890125110&partnerID=8YFLogxK

U2 - 10.1007/s10479-013-1441-1

DO - 10.1007/s10479-013-1441-1

M3 - Article

AN - SCOPUS:84890125110

SN - 0254-5330

VL - 211

SP - 381

EP - 398

JO - Annals of Operations Research

JF - Annals of Operations Research

IS - 1

ER -