Data envelopment analysis Malmquist productivity measure: new insights with an application to computer industry

Data envelopment analysis (DEA) measures the relative efficiency of decision making units (DMUs) with multiple inputs and multiple outputs. DEA-based Malmquist productivity index measures the productivity change over time. The DEA-based Malmquist productivity index can be decomposed into two components: one measuring the technical change and the other measuring the frontier shift. In the current study, we provide an extension to the DEA-based Malmquist approach by further analyzing these two Malmquist components. Our proposed new approach not only reveals patterns of productivity change and presents a new interpretation along with the managerial implication of each Malmquist component, but also identifies the strategy shifts of individual DMUs based upon isoquant changes. We can make judgments on whether or not such strategy shifts are favorable and promising. The approach is illustrated with a set of Fortune Global 500 Computer and Office Equipment companies from 1991 to 1997.