Benchmarking R&D in the semiconductor industry using DEA

Leading firms in the semiconductor manufacturing industry invest significant capital outlays and other resources in Research and Development (R&D) to attain and retain competitive advantage over their rivals. How effectives and efficient are such massive investments, and do they result in superior outputs that disproportionately enhance the capabilities of the firm for unsurpassed competitive advantage? A review of the academic literature reveals that the R&D efficiency of semiconductor manufacturing firms deserves more attention by researchers. Using Data Envelopment Analysis (DEA), a comparative benchmark of the efficiency of R&D in semiconductor manufacturing is conducted among the industry´s leading firms. Managers in ten semiconductor manufacturing firms are interviewed using a survey instrument to collect data on the relevant measures of R&D productivity. The dataset is analyzed using an output-oriented DEA model with Variable Returns to Scale (VRS). The findings are consistent with expectations: firms that invest in R&D through capital outlays, human resources and development time lead the industry in the generation of intellectual assets and reap the benefits that accrue from such investments. Managerial implications are discussed along with suggestions for further study, including refining the proposed model to yield additional output measures, comparing the efficiency of firms across multiple generations of semiconductor manufacturing process technologies, and updating the model with other measures or parameters of semiconductor manufacturing efficiency based on expert knowledge.