Examining the relationship between efficiency and business competences in the Hungarian small businesses using the DEA method

Abstract

This study examines the financial efficiency of the competences of the Hungarian small business sector through the example of the wholesale industry, based on a unique dataset provided by the Small Business Competitiveness Research Group of the PTE KTK. The study seeks to answer two important questions. First, what is the relationship between small firms' competences and short-term financial efficiency, and second, whether efficient small firms are characterized by having similar input combinations. The input factors are the ten pillars of the Small Business Competitiveness Index (SBCI). Two productivity ratios are used as outputs. The ten competency pillars can be divided into two distinctive groups by factor analysis: production and consumer-oriented competencies. Data Envelopment Analysis (DEA) is used as a test method. The result of our research is that the competitiveness of efficient firms is found to be significantly lower than that of inefficient firms in the short run, which supports the hypothesis of decreasing marginal efficiency of competence development. It can also be seen that one or a few dominant configurations of competences do not emerge in the sector under study, indicating that small firms do not really learn from each other.