Technical efficiency of small and medium manufacturing firms in Vietnam: A stochastic meta-frontier analysis

Small and medium-size enterprises (SMEs) play a vital role in the Vietnamese economy; hence more understanding of their efficiency is of interest for a variety of various stakeholders in Vietnam. This paper estimates technological gaps and identifies factors affecting variations in the technical efficiency of SMEs in Vietnam using firm-level survey data in 2008 in a stochastic meta-frontier framework. We found that, on average, SMEs can increase their current outputs by eight percent using the same quantity of inputs. Firms operating in major cities such as Hanoi and Ho Chi Minh City are found to be more efficient and possess better technology. Our evidence indicates that most SMEs in Vietnam use relatively low-level technologies, evidenced by the higher return from labour and raw materials than that from capital.