Evolvement of Malmquist Index Study: The Case of Chinese Iron and Steel Industry

Many methods can be used to measure the efficiency of companies, among which DEA-based Malmquist productivity index is the one that can measure the productivity change over different periods. This paper not only presents a new interpretation along with the managerial implication of each Malmquist component and identifies the strategy shifts of individual DMU based upon isoquant changes, but also further generalizes the known study. Traditional study mostly focus on the conditions that one decision making unit lies on the productivity frontier; omitting the case several units are efficient. The present study advances the known method, and evaluates the cases several units lie on the productivity frontier. Furthermore, this paper studies productivity growth, efficiency change, and technical progress of a sample of 23 iron and steel enterprises which are all listed companies and included in top 500 corporations of China after 2000. The results indicate that different iron and steel corporations, although in different magnitudes, have recorded significant productivity gains driven mostly by scale efficiency increases rather than technical progress. Efficiency increases, however, were mostly owing to improved scales rather than improved resource management practices.