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Productive efficiency and firm exit in the food sector

Dimara, E., Skuras, D., Tsekouras, K., Tzelepis, D.
Food policy 2008 v.33 no.2 pp. 185-196
food industry, productivity, technical barriers to trade, costs and returns, food policy, mathematical models, Greece
This work examines the effects of productive efficiency on the survival of firms in the Greek food sector. Technical and scale efficiency scores are computed within a data envelopment analysis (DEA) framework and are used as explanatory variables in a parametric (Weibull) survival model. High technical efficiency increases the median survival time and lowers the hazard rate of exit. As the scale efficiency of a firm operating either at increasing or decreasing returns to scale approaches one (1), its theoretically maximum value, the expected median survival time, is maximized for all types of exits. Developments in biotechnology, the evolution of alternative food supply networks, innovations in the food sector and competition policy are likely to affect technical and scale efficiency of food manufacturing firms. Results unraveling the effects of technical and scale efficiency on the survival of firms in the food sector are of particular relevance to food policy makers.