Technical Efficiency and Technologically Independent

This paper aims to provide a consistent empirical methodology for investigating the level of Minimum Efficient Scale (MES) in a single product industry, through the assessment of the relative productive performance of French soft cheese firms. Two deterministic approaches are used to evaluate firm-level technical efficiency: a parametric method, Corrected Ordinary Least Squares (COLS); and a non-parametric one, Data Envelopment Analysis (DEA). The data covers soft cheese producers in 1997, with detailed firm-level cost and production information. Results show a high correlation between the two estimation methods, and the (estimated) scale efficient firms are situated at the minimum of the sample’s observed average cost curve, leading to inference about the level of MES. A consistent empirical methodology to identify sub-samples of firms with similar technological characteristics is also proposed, allowing the identification of various levels of MES. This shows how technologically independent sub-markets can coexist in the same industry.