Improved efficiency measures through directional distance formulation of data envelopment analysis

This paper develops a model for an improved efficiency measure through directional distance formulation of data envelopment analysis. It deals with cases where positive and negative values co‐exist as production factors. The developed model has properties such as scalar quantity for measuring efficiency and it identifies all sources of inefficiency. The measure is weakly monotonic; units and translation do not vary with respect to inputs and outputs. The proposed model, under some restrictions, reduces to basic Data Envelopment Analysis (DEA) models such as Charnes‐Cooper‐Rhodes (CCR), Banker‐Charnes‐Cooper (BCC), and a slack based model (SBM). In addition to the above, the proposed model includes the closest targets for a given inefficient unit to achieve efficiency with less effort. The proposed model is validated using a case study done on Information Technology firms operating in India.