Comparative efficiency of producer cooperatives and conventional firms in a sample of quasi-twin companies

We investigate the comparative technical efficiency of producer cooperatives (PCs)
and conventional firms (CFs) by looking at the performance of a mixed sample of
Sardinian wine producing companies over the period 2004-2009. Thanks to the
similarity of the habitats in which the firms operate, the peculiarities of the
production environment, and the careful measurement of some key inputs through
suitable aggregation of accounting data, the observed units are “twins” in all nonorganizational
respects, providing one natural setting for comparative work. The
analysis is carried out in two steps: in the first, technical efficiency indicators for
each firm in each year are calculated using Data Envelopment Analysis (DEA) with
reference to a common production frontier. Subsequently, the measured efficiency
scores become the dependent variables of a pooled truncated maximum likelihood
regression in which we control for external covariates and firm type. To assess the
procedure’s appropriateness, we test whether the separability condition that the
support of the output variables does not depend on the set of external variables is
satisfied. Moreover, a double bootstrap algorithm is run to compute valid standard
errors and confidence intervals of the coefficients estimates. According to our
findings cooperatives are less technically efficient than their capitalist counterparts
and displays decreasing returns to scale. Both results are particularly worrying in
light of the main challenges (liberalization of EU planting rights and climate
changes) facing the wine industry in the near future.
Keywords: comparative firm efficiency, data envelopment analysis, double