Productive efficiency in the Ivorian Manufacturing Sector: An Exploratory Study Using A Data Envelopment Analysis Approach

The African industrial structure is characterised by firm-size heterogeneity with the co-existence of small, if not micro, enterprises in the informal sector and large formal organisations operating with modern technology. In this paper, using the DEA production frontier methodology, we investigate the technical efficiency of Ivorian manufacturing firms in four sectors of economic activity: textiles and garments, metal products, food processing, and wood and furniture. Efficiency scores are calculated for each of the four sectors following the four-stage procedure presented by Fried, Schmidt and Yaisawarng [1999]. The initial DEA scores are adjusted to take into account the impact of the external operating environment on the volume of input use. Technical efficiency is then broken down into three elements: the purely managerial effect, the impact of the scale of production, and a technological effect capturing the potential gain that could result from the adoption of modern technology by small informal organizations. The results are interesting in several respects. For the four investigated sectors, on average, managerial efficiency is higher in the informal sector. This outcome is partly due to the operating environment, small informal enterprises facing fewer institutional constraints to adjust the level of their inputs to the optimal level that the output requires. However, formal activities are not only more efficient in scaling their production with a varying difference according sectors, but formal firms also benefit from a modern technology. This last element proves to be decisive on the explanation of the technical efficiency gap between both types of institutional status of productive organizations.