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Efficiency and productivity of Taiwan's biotech industry

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This paper applies DEA (data envelopment analysis) and Mamlquist models to evaluate the efficiency and productivity of Taiwan's biotech industry. Moreover, we use the two-stage approach to find the effects of environmental variables on efficiency and productivity scores. A panel data set is used composed of 31 listed or over-the-counter biotech-related firms during 1998–2001. The DEA results show that the proportion of biotech firms with inefficient returns to scale rose during this period. The results from the Tobit regression further indicate that food-related firms have higher scale efficiencies than others. Mamlquist indices reveal that food- and chemical-related firms have lower technical efficiencies than others, and their total factor productivities (TFP) grew from 1998 to 2000 but fell in 2001. Obviously, technical changes constitute the main source of biotech TFP changes in Taiwan. In addition to maintaining competitive advantage in technology improvements, the managers in Taiwan's biotech industry have to put more efforts into efficiency improvement.

Keywords: biotechnology industry, Taiwan, efficiency, productivity, data envelopment analysis, DEA, environmental variables

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