The relationship between technical efficiency, firm growth and market structure in the Indonesian palm oil industry

Figures & data

Table 1. Descriptive statistics of the variables from 1990 to 2017

Variable	Mean	Standard deviation	Coefficient of variation	Minimum	Maximum
CR4	0.467	0.188	0.403	0.235	0.999
Material (in million rupiah)	2.55×10^08	3.91×10^09	15.333	13.788	2.95×10^11
Labour (person index)	273.908	589.954	2.154	7.000	14996.000
Capital (in million rupiah)	1.07×10^07	2.75×10^08	25.701	8.467	2.19×10^10
Output (in million rupiah)	6.40×10^07	9.91×10^08	15.484	397.000	4.48×10^10
Efficiency	0.260	0.233	0.897	0.001	1.000
Growth (in percent)	0.251	0.929	3.704	−1.000	10.000
COR	3.061	55.011	17.973	0.000	5295.402
NF	401.007	229.035	0.571	5.000	850.000
Dispo	0.373	0.484	1.296	0.000	1.000

Source: Indonesian Bureau of Central Statistics (BPS) and author’s calculations.

Notes: CR4, the four-firm concentration ratio; Growth, the firm’s market share growth; COR, capital output ratio; NF, number of firms per year; Dispo, dummy of the Indonesian sustainable palm oil (ISPO).

Table 2. Technical efficiency score, growth and industrial concentration

Period	Efficiency	Growth (%)	CR4
1990–1993	0.608	34.489	0.867
1994–1997	0.676	30.514	0.817
1998–2001	0.650	31.821	0.81
2002–2005	0.491	31.818	0.735
2006–2009	0.431	42.296	0.581
2010–2013	0.412	34.578	0.618
2014–2017	0.356	37.794	0.667

Source: Authors’ calculation.

Note: CR4, the four-firm concentration ratio; Growth data for the period 1990–1993 uses data for 1991–1993.

Table 3. Pairwise correlations

	Efficiency	CR4	Growth
Efficiency	1.000
CR4	0.386***	1.000
Growth	0.066***	0.030***	1.000

Source: Author’s calculations

Note: This table shows the pairwise correlations among the research’s important variables. The subscripts ***,**,* indicate significance at the 1%, 5%, and 10% levels.

Table 4. The relationship between technical efficiency and firm growth

Firm Growth
Growth (t-1)	−0.179***
	(0.013)
Efficiency (t-1)	8.372**
	(3.097)
COR	1.373
	(1.090)
NF	0.025
	(0.030)
Dispo	−19.108
	(19.247)
AR(1)	0.000
AR(2)	0.621
Sargan	0.858
Number of samples	11,238

Source: Author’s calculations

Note: Corrected standard errors are reported in brackets. The subscripts ***, **, and * indicate the significance of the relationship at the 1%, 5%, and 10% levels, respectively.

Table 5. Technical efficiency, growth and market structure of the firm

CR4
CR4 (t-1)	0.866***
	(0.139)
Efficiency (t-1)	1.032***
	(0.184)
Growth	−0.022***
	(0.004)
COR	−0.048*
	(0.029)
NF	0.002***
	(0.001)
Dispo	−0.577**
	(0.229)
AR(1)	0.085
AR(2)	0.762
Sargan	0.02
Number of samples	11,238

Source: Author’s calculations

Note: Corrected standard errors are reported in brackets. The subscripts ***, **, and * indicate significance at the 1%, 5%, and 10% levels, respectively.

Table 6. Sobel, Aroian, and Goodman test

Indirect relationship from technical efficiency to market structure through firm growth
The coefficient on the efficiency variable is based on Equation (1)(1) $Growt{h}_{i,t}={\omega }_0+{\omega }_{1}Growt{h}_{i,t-1}+{\omega }_{2}Efficienc{y}_{i,t-1}+\sum _{m=3}^4{\omega }_m{X}_{i,t}+\sum _{m=5}^5{\omega }_m{Z}_{i,t}+{\epsilon }_{i,t}$(1) (Table 4).	8.372**
	(3.097)
The coefficient on the growth variable is based on Equation (3)(3) $SobelStatistics=z=\alpha \ast \beta /SQRT\left({\beta }^2\ast S{E}_{\alpha }^2+{\alpha }^2\ast S{E}_{\beta }^2\right)$(3) (Table 5)	−0.022***
	(0.004)
Sobel test	−2.426**
	(0.076)
Aroian test	−2.394**
	(0.077)
Goodman test	−2.459**
	(0.075)

Source: Author’s calculations.

Note: Standard errors are reported in the parenthesis; the subscripts ***, **, * indicate significance at 1%, 5% and 10%.

Table 7. Panel Vector Auto Regression (PVAR)

Independent Variable	Dependent Variable
	Model 1	Model 2	Model 3
	Growth	CR4	Efficiency
	Chi-square	Chi-square	Chi-square
Efficiency	17.762***	25.346***	-
CR4	15.615***	-	12.005***
Growth	-	31.054***	0.697

Source: Authors’ calculation.

Note: The subscripts ***, **, * indicate significance at 1%, 5% and 10%.