Technological progress and the productive efficiency of construction firms in Hong Kong, 1981-2001

Abstract

This study investigates the factors that affect the productive efficiency of construction firms in Hong Kong. Productive efficiency refers to a comparison of the volume of output to that of the resources used to produce the output. This comparison reflects the technological capability of the firm. Not only does such a capability vary across different firms at any point in time, it also changes over time due to technological progress. This study measures the productive efficiency of construction firms using a non-parametric technique - Data Envelopment Analysis (DEA). The results of this study suggest that: (1) economies of scale exist at the firm level; (2) firms that subcontract out more of their work have lower productive efficiency; and (3) more capital intensive firms tend to have lower productive efficiency, although these firms also have higher growth rates in productive efficiency over time. Over the period of observation, the average productive efficiency of all construction firms has increased at a noticeably decreasing rate, thereby confirming the catching-up hypothesis. The results of the study have important implications for practitioners and policymakers. © World Scientific Publishing Company.