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Efficiency analysis of primary wood producers in British Columbia using data envelopment analysis Salehirad, Neda

Abstract

The Canadian wood industry has faced several changes during the last decade. These changes include increasing global competition, changes in macro and micro practices, market restructuring, and technological advancements. One of the most affected sectors by these changes in the business environment is the primary wood manufacturing sector in British Columbia. This study examines the performance of this sector over the period of 1990-2002. The base methodological approach used is Data Envelopment Analysis. The study has two major objectives: first, to evaluate the efficiency of BC primary wood producers in 2002 and in relation to some environmental and managerial factors. Second, to analyze the efficiency trend of BC primary wood producers during the 1990-2002 period and identify the underlying causes. The first part of the study reveals some technical inefficiencies for the BC primary wood sector, but predominantly high scale efficiencies. Technical efficiency may be improved by increasing lumber and chip production, as well as enhancing the labour productivity. BC forest regions were significantly different in terms of efficiency; the northern interior regions showed the highest efficiency, followed by the regions in the southern interior. The coastal forest regions had the lowest efficiency. The second part of the study suggests a productivity decline in 1991 for the sector, followed by a steady state until 1996 when continuous growth began. The major reason for the productivity growth was technological advancement rather than technical efficiency improvement. The analysis of the mills which were shut down in 2002, demonstrated that most of them had been performing below average provincial efficiency levels, either due to lack of technical capabilities or the scale of operations.

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