A note on data envelopment analysis vs principal component analysis: An improvement to Joe Zhu's approach

A note on data envelopment analysis vs principal component analysis: An improvement to Joe Zhu's approach

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Article ID: iaor20022051
Country: Netherlands
Volume: 132
Issue: 3
Start Page Number: 553
End Page Number: 560
Publication Date: Aug 2001
Journal: European Journal of Operational Research
Authors:
Abstract:

This paper considers a previous article published by Zhu in the European Journal of Operational Research which describes a joint use of data envelopment analysis (DEA) and principal component analysis (PCA) in ranking of decision making units (DMUs). In Zhu's empirical study, DEA and PCA yield a consistent ranking. However, this paper finds that in certain instances, DEA and PCA may yield inconsistent rankings. The PCA procedure adopted by Zhu is slightly modified in this article by incorporating other important features of ranking that Zhu has not considered. Numerical results reveal that both approaches show a consistency in ranking with DEA when the data set has a small number of efficient units. But, when a majority of DMUs in the sample are efficient, only the modified approach produces consistent ranking with DEA.

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