DEA/AR analysis of the 1988-1989 performance of the Nanjing Textiles Corporation

This article employs new data envelopment analysis/assurance region (DEA/AR) methods to evaluate the efficiency of the 35 textile factories of the Nanjing Textiles Corporation (NTC), Nanjing, China. The returns to scale (RTS) of these factories were studied without assuming that the optimal DEA solutions were unique. All DMUs are identified with points E (Extreme Efficient), E' (Efficient but not an extreme point) and F (Frontier but not efficient). We then further identify the nonfrontier DMUs with points NE, NE' and NF according to whether they are projected onto a point in E, E', or F en route to evaluating their performances. All of the inefficient factories were in class NF and had unique optimal primal-dual solution pairs. Consequently, the solution pairs satisfy the strong complementary slackness condition (SCSC). Application of cone-ratio (CR) ARs reduced significantly the number of factories in class E, and showed that some AR-efficient factories were more flexible in adopting the mixture of central planning and market economies that China currently is trying to use. Also, linked-cone (LC) ARs were applied to measure maximum and minimum profit ratios. The SCSC multiplier space approach was utilized to analyze the sensitivity of the efficiency results to potential errors in the data with and without ARs. The results in this article suggest that collective units had a better performance than state-owned units in the two consecutive years analyzed.