Directional scale elasticity considering the management preference of decision-makers

Most data envelopment analysis (DEA) studies on scale elasticity (SE) and returns to scale (RTS) of efficient units arise from the traditional definitions of them in economics, which is based on measuring radial changes in outputs caused by the simultaneous change in all inputs. In actual multiple inputs/outputs activities, the goals of expanding inputs are not only to obtain increases in outputs, but also to expect the proportions of such increases consistent with the management preference of decision-makers. However, the management preference is usually not radial changes in outputs. With the latter goal into consideration, this paper proposes the directional SE and RTS in a general formula for multi-output activities, and offers a DEA-based model for the formula of directional SE at any point on the DEA frontier, which is straightforward and requires no simplifying assumptions. Finally, the empirical part employs the data of 16 basic research institutions in Chinese Academy of Sciences (CAS) to illustrate the superiority of the proposed theories and methods.

Automated summary

This paper introduces a general formula for directional SE and RTS in multi-output activities, and presents a DEA-based model for calculating directional SE at any point on the DEA frontier without requiring simplifying assumptions. Empirical evidence using data from 16 basic research institutions in the Chinese Academy of Sciences (CAS) illustrates the superiority of the proposed theories and methods.