The choice of efficiency benchmarking metric in evaluating firm productivity and viability

Abstract The Debreu–Farrell measure of technical efficiency is widely used to benchmark firm performance. A limitation this that it orientation restricted and evaluates the performance a decision-making unit in an explicit direction relative best-practice frontier not most productive point on frontier. Therefore, does provide policy insight how direct units achieve best possible productivity level. Taking departure from conventional nonparametric benchmarking studies, study benchmarks commercial farm businesses Western Australia’s wheatbelt region using total factor (‘TFP efficiency’) compares results those when measures are applied. We find two differ influenced by different sources heterogeneity. derived insights prescriptions also differ. This important policymakers practitioners need be aware of.