PERTANIKA JOURNAL OF SOCIAL SCIENCES AND HUMANITIES

 

e-ISSN 2231-8534
ISSN 0128-7702

Home / Regular Issue / JSSH Vol. 26 (3) Jul. 2018 / JST-S0443-2018

 

Technical Efficiency Chemical Industry in Indonesia: Stochastic Frontier Analysis (SFA) Approach

Amir Machmud, Asep Bayu Dani Nandiyanto and Puspo Dewi Dirgantari

Pertanika Journal of Social Science and Humanities, Volume 26, Issue 3, July 2018

Keywords: Chemical industry, Stochastic frontier analysis, technical efficiency

Published on: 31 Jul 2018

This study aims to analyse the technical efficiency of Chemical Industry in Indonesia using Stochastic Frontier Analysis (SFA) approach. A survey explanatory method is adopted with panel type data at 4240 inputs and output level of companies during six years of observation (2010-2015). Determinant technical efficiency is estimated by using multiple regression. Both technical efficiency calculations and regression determinants are done using the TE effect approach in Frontier 4.1 software. The result of research indicates that market share variable significantly and negatively affects technical efficiency. Other variables, such as company age, business ownership, ratio concentration, and capacity utilisation affect the technical efficiency are not significant. This finding implies that to improve the efficiency of the chemical industry, market share needs to be increased through various activities such as promotion.

ISSN 0128-7702

e-ISSN 2231-8534

Article ID

JST-S0443-2018

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