Azman, M A; Abdul-Samad, Z; Lee, B L; Skitmore, M; Rajendra, D and Chuweni, N N (2024) How technological, environmental and managerial performance contribute to the productivity change of Malaysian construction firms. Engineering, Construction and Architectural Management, 31(2), pp. 618-637. ISSN 0969-9988
Abstract
Purpose: Total factor productivity (TFP) change is an important driver of long-run economic growth in the construction sector. However, examining TFP alone is insufficient to identify the cause of TFP changes. Therefore, this paper employs the infrequently used Geometric Young Index (GYI) and stochastic frontier analysis (SFA) to measure and decompose the TFP Index (TFPI) at the firm-level from 2009 to 2018 based on Malaysian construction firms' data. Design/methodology/approach: To improve the TFPI estimation, normally unobserved environmental variables were included in the GYI-TFPI model. These are the physical operation of the firm (inland versus marine operation) and regional locality (West Malaysia versus East Malaysia). Consequently, the complete components of TFPI (i.e. technological, environmental, managerial, and statistical noise) can be accurately decomposed. Findings: The results reveal that TFP change is affected by technological stagnation and improvements in technical efficiency but a decline in scale-mix efficiency. Moreover, the effect of environmental efficiency on TFP is most profound. In this case, being a marine construction firm and operating in East Malaysia can reduce TFPI by up to 38%. The result, therefore, indicates the need for progressive policies to improve long-term productivity. Practical implications: Monitoring and evaluating productivity change allows an informed decision to be made by managers/policy makers to improve firms' competitiveness. Incentives and policies to improve innovation, competition, training, removing unnecessary taxes and regulation on outputs (inputs) could enhance the technological, technical and scale-mix of resources. Furthermore, improving public infrastructure, particularly in East Malaysia could improve regionality locality in relation to the environmental index. Originality/value: This study contributes to knowledge by demonstrating how TFP components can be completely modelled using an aggregator index with good axiomatic properties and SFA. In addition, this paper is the first to apply and include the GYI and environmental variables in modelling construction productivity, which is of crucial importance in formulating appropriate policies.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | construction firms; developing economies; environmental variables; geometric young index; Malaysia; stochastic frontier analysis; total factor productivity |
| Index terms: | developing economy, total factor productivity, construction firm, manager, construction sector, methodology, competition, regulation, productivity, estimation, Malaysia, efficiency, public infrastructure, economic growth, modelling, construction productivity, monitoring, competitiveness |
| Subjects: | Geography, management, economic development, research methods, performance management, infrastructure and transport systems, industry analysis, political science, market analysis, practitioner, production economics, control systems, organization, analytical methods, financial and cost management, operations management |
| Topics: | Quality Management, International Construction, Site Management, Research Practice, Geographical Context, Project Management, Engineering Principles, Cost Management, Business Strategy, Sustainability, Governance, Roles and Professions |
| Descriptive scope: | 4 PCTA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here