Selection of Inputs and Outputs in Data Envelopment Analysis

Productive efficiency lies in producing the maximum output from a given bundle of inputs or using the minimal input for a target bundle of outputs. The method of Data Envelopment Analysis (DEA) introduced in the OR/MS literature in the late 1970s and subsequently refined and extended over the decades has become a popular analytical device for measurement of efficiency. However, in many empirical applications inadequate attention is paid to the selection of inputs and outputs. Production is the process of creating value through transformation of inputs into outputs. It is important to ensure that the resources defined as inputs in a specific context do in fact contribute to the outcomes treated as outputs. In this paper we start with the scope of decision making by the producer to define the 'boundary' of the firm. This enables us to distinguish inputs (resources that enter into the jurisdiction of the firm from outside) and outputs (that get out of the boundary and are not subject to further processing by the firm). We visualize a firm as a vertically integrated organization with sub-centers of decision making at different stages of production. This allows us to differentiate an intermediate output (or a throughput) from a pure output or input. We discuss the appropriate choice of inputs and outputs in different areas of empirical application including manufacturing, banking, education, and health care. Special attention is paid to the treat of undesirable outputs (like pollution and industrial waste) in DEA. Finally we consider contextual or environmental variables that affect production but are not subject to manipulation by the producer.

  • Prof. Subhash C Ray, University of Connecticut
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  • 2017-01-09

Indian Brand of Crony Capitalism: The Cultural Underpinnings

One grave concern that the Indian economy/society face today is that of ubiquitous corruption/cronyism. Despite its importance, there is dearth of scholarly treatment of this phenomenon. In this presentation, we examine the cultural underpinnings of corruption/cronyism in India. There are four cultural dimensions that are pertinent to understanding Indian brand of cronyism and its prevalence: individualism-collectivism, verticalness-horizontalness, universalism-particularism, and ascription-achievement. In a collectivistic culture like India, interpersonal relationships are the basis of exchanges between one member and the other rather than formal rules/structures. Verticalness (high power distance) of Indian culture implies that people in power give preferential treatments to their in-groups at the expense of the out-groups. The ascription-orientation of Indian society means that status is not earned but ascribed to individuals based on family, gender, position, age, and other such factors, thereby undermining consideration of merit, achievement, and performance. According to the fourth cultural dimension, Indian society is high on particularism and low on universalism. A society high on universalism emphasizes universal laws, rules, and contracts, but in a particularistic culture, contracts, laws, and rules take a back seat to relationships between individuals. The outcomes of such a unique Indian cultural milieu (collectivistic, vertical, ascriptive, and particularistic) include inequality of influence, subversion of law, and poor enforcement of law. Further this cultural milieu in combination with Indian economic philosophy and history give rise to the unique brand of crony capitalism that we see in India today.

  • Prof. Naresh Khatri, University of Missouri, Columbia
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  • 2017-01-06

Art and science of financial analysis using simple cases

In my own teaching experience at top business schools, I have found that the MBA curriculum often lacked the one class that brings together knowledge from diverse areas such as accounting, economics, finance, production and marketing to analyze and solve business problems. While students understand different subjects/topics pretty well in isolation, they often cannot see how they are connected, or how to integrate knowledge from different areas to analyze and solve unstructured problems. Then there is this elusive quality called intuition which cannot be taught! For many years, I have been trying to teach a class that not only integrates different subjects usually taught in a business school (the science part), but also show how intuition (the art part) plays a significant role in solving problems. The aim of this lecture is to introduce you to some of my ideas through short cases in financial analysis.

  • Prof. Suresh Govindaraj, Rutgers Business School- Newark and New Brunswick, Rutgers University
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  • 2017-01-04