Using DEA to evaluate 29 Canadian textile companies - Considering returns to scale

In this research, we use Data Envelopment Analysis (DEA) to evaluate the performance of 29 Canadian textile companies in 1994. Using the Charnes, Cooper and Rodes (CCR) model in DEA, we first obtain the results of efficiency scores and returns to scale of 29 Canadian textile companies. We then focus on the returns to scale to examine the possibility of utilizing the inefficient inputs by either further expansion or vertical integration. We develop a mathematical model to consider the trade-off between reducing and not reducing the input surplus. We use the cone ratio model to find the optimal level of vertical utilization. The computational results are based on real data from the Canadian textile companies. (C) 1998 Elsevier Science B.V. All rights reserved.