Examining the technical efficiency of small industries: A case study of the crackers industry in South Sumatera, Indonesia

Mukhlis Mukhlis

doi:10.29259/jep.v18i1.10847

Examining the technical efficiency of small industries: A case study of the crackers industry in South Sumatera, Indonesia

Mukhlis Mukhlis

Abstract

Small industries are life-sustaining for communities because of their political and strategic position in terms of creating job opportunities and increasing revenue. One small industrial sector that has the potential to be developed is the food industry. Small food industries are widely scattered in every area, including in the city of Palembang. A small industrial group of food that became one of the culinary icons in Palembang is the cracker industry. This type of industry is a culinary icon that has been famous for foreign countries. Nevertheless, the cracker industry is still experiencing obstacles in terms of capital and marketing. The cost of raw materials is relatively expensive to technically trigger the industry inefficiencies. Therefore, it is necessary to review the technical efficiency of this small industry. The variables used in this study were capital, labor, and output. The data used is secondary data that is analyzed by using the Stochastic Frontier Analysis (SFA) approach. The results showed that the technical efficiency achievement of small industrial crackers in South Sumatera is still categorized as low. The use of labor input is more effective than capital use as a result of the utilization of technology and local resources. Therefore, the development of small industrial crackers through an efficiency approach cannot be separated from the application of technology, human resource management, marketing, and business climate.

Keywords

technical efficiency, stochastic frontier, small industry

Full Text:

PDF

References

Aigner, D., Lovell, C. A. K., & Schmidt, P. (1977). Formulation and estimation of stochastic frontier production function models. Journal of Econometrics, 6(1), 21–37. https://doi.org/https://doi.org/10.1016/0304-4076(77)90052-5

Aquilina, M., Klump, R., & Pietrobelli, C. (2006). Factor substitution, average firm size and economic growth. Small Business Economics, 26(3), 203–214. https://doi.org/10.1007/s11187-005-4715-4

Asmara, R., Hanani, N., & Irawati, N. (2011). The Analysis of Technical Efficiency with Frontier Approach in Business of Chips MOCAf (Modified Cassava Flour). Habitat, XXII(1), 52–59.

Atherton, A. (2005). A Future for Small Business? Prospective Scenarios for The Development of The Economy Based on Current Policy Thinking and Counterfactual Reasoning. Futures, 37(8), 777–794. https://doi.org/https://doi.org/10.1016/j.futures.2005.01.002

Battese, G. E. (1992). Frontier Production-Functions and Technical Ffficiency-A Survey of Empirical Applications in Agricultural-Economics. Agricultural Economics, 7, 185–208. https://doi.org/10.1016/0169-5150(92)90049-5

Central Bureau Statistics of South Sumatra. (2017). South Sumatra in Figure 2017. Central Bureau Statistics of South Sumatra.

Coelli, T. J., Prasada Rao, D. S., O’Donnell, C. J., & Battese, G. E. (2005). An introduction to efficiency and productivity analysis. In An Introduction to Efficiency and Productivity Analysis. https://doi.org/10.1007/b136381

Coelli, T. J., Rao, D. S. P., O’Donnell, C. J., & Battes, G. E. (2005). An introduction to efficiency and productivity analysis. In Biometrics (Vol. 41). https://doi.org/10.2307/2531310

Farrell, M. J. (1957). The Measurement of Productive Efficiency. Journal of the Royal Statistical Society. Series A (General), Vol. 120, p. 253. https://doi.org/10.2307/2343100

Jehle, G. a, & Reny, P. J. (2001). Advanced Microeconomic Theory. In Annals of Physics (Vol. 2).

Jondrow, J., Knox Lovell, C. A., Materov, I. S., & Schmidt, P. (1982). On the estimation of technical inefficiency in the stochastic frontier production function model. Journal of Econometrics, 19(2–3), 233–238. https://doi.org/10.1016/0304-4076(82)90004-5

Kodde, D. A., & Palm, F. C. (1986). Wald Criteria for Jointly Testing Equality and Inequality Restrictions. Econometrica, 54(5), 1243–1248. https://doi.org/10.2307/1912331

Kumbhakar, S., Ghosh, S., & McGuckin, J. T. (1991). A Generalized Production Frontier Approach for Estimating Determinants of Inefficiency in U.S. Dairy Farms. Journal of Business & Economic Statistics, 9(3), 279–286. Retrieved from https://econpapers.repec.org/RePEc:bes:jnlbes:v:9:y:1991:i:3:p:279-86

Kuncoro, M. (2003). Why Manufacturing Industry Persisted to Cluster Spatially in Java. Gadjah Mada International Journal of Business, 5(2), 221–246. https://doi.org/https://doi.org/10.22146/gamaijb.5410

Kuncoro, M. (2013). Economic geography of small and cottage industrial clusters in Java Island Indonesia. Global Advanced Research Journal of Geography and Regional Planning, 2(1), 6–18.

Meeusen, W., & van Den Broeck, J. (1977). Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error. International Economic Review, 18(2), 435–444. https://doi.org/10.2307/2525757

Minangsari, F., Robiani, B., & Mukhlis, M. (2019). The Efficiency of the Pharmaceutical Industry in Indonesia: A Stochastic Frontier Approach. Jurnal Ekonomi Pembangunan, 17(2), 49–58. https://doi.org/10.29259/jep.v17i2.8949

Mohd Noor, Z., & Ismail, R. (2007). Analisis kecekapan teknik dalam industri skel kecil dan sederhana di Malaysia. International Journal of Management Studies (IJMS), 14(1), 199–218.

Mukhlis, Robiani, B., Marwa, T., & Chodijah, R. (2017). Agglomeration of Manufacturing Industrial, Economic Growth, And Interregional Inequality in South Sumatra, Indonesia. International Journal of Economics and Financial Issues, 7(4), 214–224.

Murphy, G. B., Trailer, J. W., & Hill, R. C. (1996). Measuring performance in entrepreneurship research. Journal of Business Research, 36(1), 15–23.

Nurlela. (2015). Analisis Efisiensi dan Produktivtas Usaha Kecil Menengah di Kota Sorong (Kasus Usaha Kripik). Agroforestri, X(3), 247–254.

Pettigrew, A. M. (1992). The character and significance of strategy process research. Strategic Management Journal, 13(S2), 5–16. https://doi.org/10.1002/smj.4250130903

Wajdi, M. F. (2012). Analisis efisiensi industri kecil berdasarkan analisis stochastic frontier. BENEFIT Jurnal Manajemen Dan Bisnis, 16(1), 10–22.

Yuliana, S., Robiani, B., & Mukhlis. (2018). Effect of Investment on Employment in the Formal Small Industries In the District/City of South Sumatra Province, Indonesia. International Journal of Economics and Financial Issues, 8(1), 1–8.

DOI: https://doi.org/10.29259/jep.v18i1.10847

Refbacks

There are currently no refbacks.

Jurnal Ekonomi Pembangunan
Jalan Raya Palembang-Prabumulih Km. 32
Jurusan Ekonomi Pembangunan, Fakultas Ekonomi Universitas Sriwijaya
Indralaya, Sumatera Selatan, Indonesia
Email: jep.unsri@gmail.com, Tel/Fax : (0711)580231

p-ISSN: 1829-5843, e-ISSN 2685-0788