TY - JOUR
T1 - Reconciling ratio analysis and DEA as performance assessment tools
AU - Chen, Wen-Chih
AU - McGinnis, Leon F.
PY - 2007/4/1
Y1 - 2007/4/1
N2 - The assessment of operational performance remains a fundamental challenge both in practice and in theory. Data envelopment analysis (DEA) is one method developed in production economic theory and applied by researchers to study groups of enterprises. In practice, individual enterprises almost universally rely on simple output-input ratios. Each approach has its strengths and weaknesses, but the theoretical connection between the two has not been fully articulated. This paper uses the framework of DEA to establish a mathematical relationship between DEA efficiency scores and corresponding ratio analysis. The relationship can be expressed as a product of seven components: technical efficiency, technical change, scale efficiency, input slack factor, input substitution factor, output slack factor and output substitution factor.
AB - The assessment of operational performance remains a fundamental challenge both in practice and in theory. Data envelopment analysis (DEA) is one method developed in production economic theory and applied by researchers to study groups of enterprises. In practice, individual enterprises almost universally rely on simple output-input ratios. Each approach has its strengths and weaknesses, but the theoretical connection between the two has not been fully articulated. This paper uses the framework of DEA to establish a mathematical relationship between DEA efficiency scores and corresponding ratio analysis. The relationship can be expressed as a product of seven components: technical efficiency, technical change, scale efficiency, input slack factor, input substitution factor, output slack factor and output substitution factor.
KW - Data envelopment analysis
KW - Efficiency
KW - Partial productivity
KW - Ratio analysis
UR - http://www.scopus.com/inward/record.url?scp=33750832072&partnerID=8YFLogxK
U2 - 10.1016/j.ejor.2005.06.071
DO - 10.1016/j.ejor.2005.06.071
M3 - Article
AN - SCOPUS:33750832072
VL - 178
SP - 277
EP - 291
JO - European Journal of Operational Research
JF - European Journal of Operational Research
SN - 0377-2217
IS - 1
ER -