Performance Evaluation of Indian Information Technology-enabled Services (ITeS) Industry: An Application of Two-Stage Data Envelopment Analysis
Abstract
This study aims to evaluate the performance of Indian ITeS industry during 2000-01 to 2014-15 by using a two-stage empirical method. In the first stage, performance is evaluated in terms of technical efficiency by using data envelopment analysis (DEA). In the second stage, the determinants of the technical efficiency score are assessed by using random-effects tobit model. For this purpose, data is collated from the Centre for Monitoring Indian Economy (CMIE) Prowess database. In DEA, overall, managerial and scale efficiency scores are evaluated. Pareto-Koopmans technical efficiency is evaluated to take care of the presence of non-radial input and/or output slacks. The DEA results reveal that managerial inefficiency is the major contributor to the overall technical inefficiency as compared to the inefficient scale of production. Moreover, the Indian ITeS industry is found to be dominated by the firms exhibiting decreasing returns to scale for most of the study period. The findings of the second-stage regression show that firm-size, Market concentration, net exports and profit rate have positive and statistically significant impact on efficiency. The empirical results also reveal that Public limited and non-group firms are more efficient than their private and group counterparts, respectively. Finally, the regression results indicate that 2008’s US sub-prime crisis has negative and statistically significant impact on the performance of Indian ITeS industry.
Keywords: Indian ITeS industry; Data envelopment analysis; Pareto-Koopmans technical efficiency; Input-specific Efficiency;Â Two-stage analysis; Random-effects Tobit model.
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