Comparing China Mainland and China Hong Kong contractors' productive efficiency: A DEA Malmquist Productivity Index approach

Purpose – The purpose of this study is to present and compare the productive efficiency of China Mainland and China Hong Kong contractors, and to identify and investigate the components and sources of their efficiency under different economic and institutional environments. Design/methodology/approach – Data envelopment analysis (DEA) is a non-parametric approach to examine the relative efficiency among different firms. This study employs DEA based Malmquist Productivity Index (MPI) to compile the efficiency scores of 20 construction companies listed in the Hong Kong Exchange and Clearing Limited (HKEx) from 2004 to 2010. Findings – A decomposition of MPI suggests that catch-up effect has contributed more to contractor's efficiency than frontier-shift effect. Compared to their Mainland counterparts, Hong Kong contractors have higher MPI mainly due to higher efficiency scores in catch-up effect. Practical implications – Hong Kong contractors have advantage over Mainland contractors in their managerial and strategic capabilities. Hence Hong Kong contractors should lever on their managerial expertise in accounting, financing and legal services when exporting their services. Meanwhile, Mainland contractors should improve their efficiency by making the most use of their technological and human resources, thus improving upon their international entrepreneurship. Originality/value – This study is the first attempt to apply MPI to compare the productive efficiency of listed contractors in China Mainland and China Hong Kong. The findings contribute to the body of knowledge for productive efficiency measurement.