A Frontier Approach to Measuring Impact of Adoption of Flexible Manufacturing Technology on Technical Efficiency of Malaysian Manufacturing Industry

DOI: 10.4236/ti.2012.34037   PDF   HTML     4,004 Downloads   5,945 Views   Citations


This paper examines the impact of the adoption of Flexible Manufacturing Technology (FMT) on the Technical Efficiency of Malaysia Manufacturing Industry. Owing to the potential multicollinearity, the Principal Component Analysis has been adopted to extract the most appropriate underlying dimensions of FMT in an effort to substitute the eight FMT variables. The study has been conducted within FMT intensively adopted 16 three-digit industries that encompass 50 five-digit industries covering the years 2000-2005. The results obtained from the two situations, one, including the industry fixed effects dummy variables and the other without these, are contrasted. It is found that the model that included the industry fixed effect dummy variables possesses a greater explanatory power. The two principal components that account for the greater variation in FMT show positive and moderately significant relationship with TE. The study concludes with sufficient evidence that FMT has a direct and moderately significant relationship with TE.

Share and Cite:

D. Dolage and A. Sade, "A Frontier Approach to Measuring Impact of Adoption of Flexible Manufacturing Technology on Technical Efficiency of Malaysian Manufacturing Industry," Technology and Investment, Vol. 3 No. 4, 2012, pp. 266-275. doi: 10.4236/ti.2012.34037.

Conflicts of Interest

The authors declare no conflicts of interest.


[1] R. Mahadevan, “Perspiration versus Inspiration: Lessons from a Rapidly Developing Economy,” Journal of Asian Economics, Vol. 18, No. 2, 2007, pp. 331-347. doi:10.1016/j.asieco.2007.02.009
[2] T. J. Coelli, D. S. P. Rao, C. J. O’Donnell and G. E. Battese, “An Introduction to Efficiency and Productivity Analysis,” Springer, New York, 2005.
[3] D. J. Aigner, C. A. K. Lovell and P. J. Schmidt, “Formulation and Estimation of Stochastic Frontier Production Models,” Journal of Econometrics, Vol. 6, No. 1, 1977, pp. 21-37. doi:10.1016/0304-4076 77 90052-5
[4] R. Mahadevan, “A Frontier Approach to Measuring Total Factor Productivity Growth in Singapore’s Services Sector,” Journal of Economic Studies, Vol. 29, No. 1, 2002, pp. 48-58. doi:10.1108/01443580210414111
[5] R. Mahadevan and K. P. Kalirajan, “On Measuring Total Factor Productivity Growth in Singapore’s Manufacturing Industries,” Applied Economics Letters, Vol. 6, No. 5, 1999, pp. 295-298. doi:10.1080/135048599353267
[6] J. Wind and A. Rangaswamy, “Customisation: The Next Revolution in Mass Customization,” Journal of Interactive Marketing, Vol. 15, No. 1, 2001, pp.13-31.
[7] G. Da Silveria and F. S. Fogliatto, “Effects of Technology Adoption on Mass Customisation Ability of Broad and Narrow Market Firms,” Gestao & Producao, Vol. 12 No. 3, 2005, pp. 347-359. doi:10.1590/S0104-530X2005000300006
[8] P. Kumar and S. G. Deshmukh, “A Model for Flexible Supply Chain through Flexible Manufacturing,” Global Journal of Flexible Systems Management, Vol. 7, No. 3-4, 2006, pp. 17-24.
[9] R. Sinha and C. H. Noble, “The Adoption of Radical Manufacturing Technologies and Firm Survival,” Strategic Management Journal, Vol. 29, No. 9, 2008, pp. 943962. doi:10.1002/smj.687
[10] Malaysian Industrial Development Authority (MIDA), “Malaysia-Investment in the Manufacturing Sector,” MIDA, 2007.
[11] C. Sun and K. L. Kalirajan, “Gauging the Sources of Growth of High-Tech and Low-Tech Industries: The Case of Korean Manufacturing,” Blackwell Publishing Ltd., Hoboken, 2005.
[12] X. Zhang and S. Zhang, “Technical Efficiency in China’s Iron and Steel Industry: Evidence from the New Census Data,” International Review of Applied Economics, Vol. 15, No. 2, 2001, pp. 199-211. doi:10.1080/02692170151137078
[13] J. D. Lee, T. A. Kim and E. Heo, “Technological Progress versus Efficiency Gain in Manufacturing Sectors,” Review of Development Economics, Vol. 2, No. 3, 1998, pp. 268-281. doi:10.1111/1467-9361.00041
[14] G. Battese and S. S. Broca, “Functional Forms of Stochastic Frontier-Production Functions and Models for Technical Inefficiency Effects: A Comparative Study for Wheat Farmers in Pakistan,” Journal of Productivity Analysis, Vol. 8, No. 4, 1997, pp. 395-414.
[15] E. R. Brendt and C. J. Morrsison, “High Tech Capital Formation and Economic Performance in USA Manufacturing Industries: An Exploratory Analysis,” Journal of Econometrics, Vol. 65, No. 1, 1995, pp. 9-43.
[16] D. A. R. Dolage, A. B. Sade and M. A. Elsadig, “The Influence of Flexible Manufacturing Technology Adoption on Productivity of Malaysian Manufacturing Industry,” Economic Modelling, Vol. 27, No. 1, 2010, pp. 395-403. doi:10.1016/j.econmod.2009.10.005
[17] L. H. Amato and C. H. Amato, “The Impact of High Tech Production Techniques on Productivity and Profitability in Selected US Manufacturing Industries,” Review of Industrial Organization, Vol. 16, No. 4, 2000, pp. 327-342. doi:10.1023/A:1007800121100
[18] D. A. R. Dolage and A. B. Sade, “The Impact of Adoption of Flexible Manufacturing Technology on Price Cost Margin of Malaysian Manufacturing,” Technology and Investment, Vol. 3, No. 1, 2012, pp. 26-35. doi:10.4236/ti.2012.31005
[19] R. Mahadevan, “Is There a Real TFP Growth Measure for Malaysia’s Manufacturing Industries?” ASEAN Economic Bulletin, Vol. 19, No 2, 2002, pp. 178-190. doi:10.1355/AE19-2E
[20] K. P. Kalirajan and R. T. Shand, “Frontier Production Functions and Technical Efficiency Measures,” Journal of Economic Surveys, Vol. 13, No. 2, 1999, pp. 149-172. doi:10.1111/1467-6419.00080
[21] R. Mahadevan, “Assessing the Output and productivity Growth of Malaysia’s Manufacturing Sector,” Journal of Asian Economics, Vol. 12, No. 4, 2001, pp. 587-597. doi:10.1016/S1049-0078 01 00104-X
[22] Q. N. Vu, “Technical Efficiency of Industrial StateOwned Enterprises in Vietnam,” Asian Economic Journal, Vol. 17, No. 1, 2003, pp. 87-101.
[23] H. Margono and S. C. Sharma, “Efficiency and Productivity Analysis of Indonesian Manufacturing Industries,” Journal of Asian Economics, Vol. 17, No. 6, 2006, pp. 979-995. doi:10.1016/j.asieco.2006.09.004
[24] Federation of Malaysian Manufacturers (FMM), “Directory -2007,” FMM, 2007.
[25] R. Mahadevan, “How Technically Efficient Are Singapore’s Manufacturing Industries?” Applied Economics, Vol. 32, No. 15, 2000, pp. 2007-2014. doi:10.1080/00036840050155931
[26] S. Chandrasiri, “Productivity and Technology in Sri Lankan Manufacturing Industry, Human Development in a Knowledge-Based Society: Sri Lankan Scene,” The Sri Lanka Economic Association, Colombo, 2005.
[27] R. H. McGuckin and M. L. Streitwieser, “The Effect of Technology Use on Productivity Growth,” Centre of Economic Studies, 1996.
[28] D. K. Round, “Price Cost Margins in Australian Manufacturing Industries, 1971-1972,” University of Adelaide, Adelaide, 2001.
[29] S. J. Coakes, L. Steed and J. Price, “SPSS 15.0, Analysis without Anguish,” John Wiley & Sons Australia, Ltd., Melbourne, 2008.
[30] A. Field, “Discovering Statistics Using SPSS,” SAGE Publications Ltd., London, 2005.

comments powered by Disqus

Copyright © 2020 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.