Cost Efficiency of Listed Electronics- Information Firms in China

This research studies twenty listed electronics-information firms in China during the period 2001 to 2005 and applies Battese and Coellis (1995) model of a stochastic frontier function to compute the cost inefficiency scores. Simultaneously it also evaluates the influence on cost efficiency of R&D expenditure, scale and management model of the firms. All nominal variables in monetary units have been deflated into real variables at 2001 prices. Our empirical results are summarized as follows: The average cost efficiency of Chinese listed electronics-information firms is very low. R&D expenditure significantly improves cost efficiency. The scale of a firm significantly worsens cost efficiency, showing dis-economies of scale. Operational diversification significantly improves cost efficiency, showing economies of scope.