Author : Bui Dung The

Summary : The study id the first attempt to estimate technical efficiency of micro and small enterprises and to analyze the significance of different factors, including clustering, in determing technical efficiency of small firms in Thua Thien Hue province, Central Vietnam. It is inspired by the literature ob clustering which stresses that high availability of information and factors imputs, and competitive environment are of strategic importance to bringing about improved technical efficiency. The study used firm-level data collected through direct interview with prepared questionnaire for a smaple of 140 micro and small enterprises of two sectors, construction materials and furniture, which are most numerous and important sectors, ttypically rural-based, in the province of Thua Thien Hue. Econometric analysis using stochastic frontier methods is undertaken to estimate levels of technical efficiency of firms in the two sectors. It is found that there exists a wide dispersion of technical efficiency across firms in the two sectors. It is found that there exists a wide dispersion of technical efficiency across firms, especially for non-clustered ones, and clustered firms are more technically efficient than their non-clustered counterparts. Analysis of technical shows that clustering among other things, is a significant determinant of firm-level technical efficiency. The study also shows that clustering attributes and frim's characteristics exert effects on technical efficiency in a sector specific manner. The study has offered a number of policy implications to increase technical efficiency of firms and to reduce the inter-firm variance in efficiency. Proposed policies include those at national and industry levels to make market more competitive and transparent as well as policies at firm-level to improve firms' human capital and technical capability.