Technical Efficiency of Small- and Medium-
Scale Enterprises: Evidence from a Survey of Enterprises in Tanzania
Assefa
Admassie
Francis A.S.T. Matambalya
Abstract:
The
significance of small- and medium-scale enterprises (SMEs) is acknowledged
worldwide. SMEs form the vanguard of the modern enterprise sector and present
the propelling force of economic modernization and growth in developing
economies. But it is imperative to examine their efficiency levels in order to
formulate appropriate policies for the development of SMEs. In this study, the
level of technical efficiency of SMEs in Tanzania has been examined using a
Cobb-Douglas stochastic frontier production function. The findings indicate that
high levels of technical inefficiency, which reduce their potential output
levels significantly, characterize
the Tanzanian SMEs. Assisting these firms to improve their technical efficiency
through adequate supply of inputs, markets, and credit facilities, and
undertaking extensive infrastructural development and training could be
important measures.