Efficiency measurement of the construction industry in Taiwan: a stochastic frontier cost function approach

Ren-Jye Dzeng, Jih Shong Wu*

*Corresponding author for this work

Research output: Contribution to journalArticle

4 Scopus citations

Abstract

Construction firms require a large cash flow, thereby creating a significant financial leverage. Therefore, identifying a highly effective cost efficiency model is essential for construction firms, especially under the pressure of competition in today's global market. This research used stochastic frontier analysis (SFA) to model and measure the cost efficiency of construction firms in Taiwan, and to investigate the relationships between input resources and cost efficiency. The main findings include: (1) subcontracting reduces labour capacity; (2) larger firms can be more cost efficient; (3) appropriate financial leverage increases cost efficiency and capital; and (4) reducing equipment costs increases cost efficiency. These findings can help construction firms to strategically adjust the management of their firm and improve cost efficiency.

Original languageEnglish
Pages (from-to)335-344
Number of pages10
JournalConstruction Management and Economics
Volume31
Issue number4
DOIs
StatePublished - 1 Apr 2013

Keywords

  • Construction cost
  • efficiency
  • measurement
  • stochastic frontier
  • Taiwan

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