Returns to growth in a nonparametric DEA approach

In this contribution, first the concept of returns to growth (RTG) of a high-tech firm facing hyper-competition in the new economy is introduced by describing a proportional relationship between growth in inputs and growth in outputs using the growth efficiency (GE) model of Sengupta. Second, both technology- and value-based methods are suggested for estimating the RTG behavior of high-tech firms. Third, although the GE concept seems closely related to the notion of total factor productivity change, this link remains unexplored: we suggest a link between both concepts. Finally, our empirical application to the Indian computer industry reveals that first, companies operating under increasing returns to scale (RTS) may exhibit constant or decreasing RTG; second, companies showing constant RTS may exhibit increasing or decreasing RTG; and third, companies showing decreasing RTS may exhibit constant or increasing RTG. These findings imply that RTS estimates need not provide proper information regarding the growth strategy behavior of high-tech companies.