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 (2002). Second, both technology- and value-based methods are suggested for estimating the RTG behavior of high-tech firms. Third, though 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 hardware 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