ABSTRACT
Introduction This chapter is concerned with analysis of the extent to which manufacturing firms are able to attain their potential of technical efficiency. The concept is defined in the next section. Intuitively it measures the distance which the sample firms are from the most efficient set among them. We will be focusing on five African countries, namely Ghana, Kenya, Tanzania, Zambia, and Zimbabwe. These countries, to a good extent, are representative of the existing challenges that hinder industrial development in sub-Saharan Africa. All five of these countries have initiated extensive policy reform programs; they span the diversity of per capita incomes and industrial development levels in the sub-Saharan Africa region; and they exhibit different levels of interaction within world markets. Using the stochastic frontier approach, this section attempts to address two general questions, one related to the determinants of technical efficiency within each country and the other to the inter-country differences in technical efficiency. For the former, we examine the determinants of a firm’s efficiency for each country separately within a unified framework. We specifically examine variables such as size, age, and several other firms and/or management related attributes. We find many similarities and several differences among the five countries under study. Of particular importance, we find common factors such as size and trade orientation to have significant impact on firms’ efficiency across almost all five countries. For the second question, a general framework is introduced within which, technical efficiency of firms is compared across different countries.
