Textile Manufacturing in Eight Developing Countries: Does Business Environment Matter for Firm Technical Efficiency?

Production frontiers with technical inefficiency determinants are estimated using stochastic models for textile manufacturing in eight developing countries encompassing about 800 firms. Inefficiency determinants are considered either on an individual basis, or in the form of composite indicators reflecting in-house or managerial factors and various dimensions of the external environment. Although each of these two categories of factors is statistically significant, the former proves more influential in the explanation of the difference in efficiency between firms. Simulations are then proposed to assess the efficiency levels that would occur if firms had the opportunity to produce in the most favourable productive environments.