A study on the efficiency analysis between large and mid-siz ed Korean construction companies using DEA technique

Abstract

Background/Objectives: In this study, we analyze the efficiency of Korean large and mid-sized construction enterprises by utilizing DEA techniques to identify characteristics and review selectable strategies. Methods/Statistical analysis: This study presents a two-stage efficiency analysis methodology in total. The first stage overall DEA calculates the overall efficiency of inputs and outputs. The second stage fundamental DEA calculates the efficiency of individual combinations of inputs and outputs to estimate the variables that fundamentally affect the results of the first stage DEA. As a result, the improvement strategy for becoming an efficient entity is reviewed by deriving inefficient variables. Findings: The first stage DEA found that large/mid-sized construction companies showed different efficiency results. It was analyzed that about 83.5 percent of large construction companies need to scale down, while about 61.1 percent of mid-sized construction firms need to scale up. Statistically, there was also a difference in efficiency analysis of scale between groups of large/mid-sized construction companies. Therefore, it was understood that the efficiency analysis of the construction company should be carried out by considering the differences between the two groups rather than by aggregating them
without considering the differences between the groups of scale. On the other hand, the second stage DEA found that even if the overall inputs were more efficient, the partial inputs could be inefficient. That is, the opposite result of the first stage DEA was shown in the second stage DEA. Thus, it was noted that the efficiency analysis of a construction company would need to analyze the second stage fundamental DEA model at the same time, not just the first stage overall DEA model. Improvements/Applications: Although a typical first stage DEA is efficient, a second stage DEA may be different, so it is suggested that a second stage DEA should be combined for efficiency analysis.