Decomposing stochastic frontier efficiency into secular and organisational efficiency

In this article the authors propose to decompose the frontier efficiency into two distinct parts, namely a secular part (long-term) and an organisational part (short-term). A product life-cycle model for twelve industries of the Belgian manufacturing sector has been tested for the period 1979-1983 by using cluster analysis. Filtering out the secular effect for each cluster (groups of firms) makes it possible to decompose the overall technical efficiency. It turns out that for 27 out of 44 groups of firms the organisational part is larger than the secular part. Considering the status of the firms, organisational efficiency differences could be analysed directly for groups of similar firms.