Impact of political changes on industrial efficiency: a case of Ukraine

Abstract

Purpose – The paper aims to devote itself to the researching of the changes in firm efficiency in consumer goods industry under the political changes and tightening of competition. This study has for an objective the estimation of the consequences of changes in policy on firm efficiency and the development the ways of improving of the efficiency of both separate firms and the whole industries. Design/methodology/approach – The industrial efficiency is measured by data envelopment analysis (DEA). The change of efficiency by reason of political events during 2004/2005 is evaluated by the Malmquist total factor productivity index. Some firm attributes are examined for their impact on efficiency. They are firm size, regional location and property category. The results are based on a sample of 336 Ukrainian firms of consumer goods industry. Findings – Sharp socio-oriented reforms that promoted the rise of public welfare, led to many negative economic trends. But the impact of political changes on industrial efficiency was multivalued. The political changes had positive influence on efficiency of beverages and food industry and negative on light industry efficiency. The manufacture of food, textiles, wearing apparel and leather products is among the lowest efficient industrial activities in Ukraine and need to be improved. The empirical results reveal the influence of firm size, regional location and property category on firm efficiency. Research limitations/implications – The research is limited by three main consumer goods industries and by relatively short data set. The former explains that they are the most socio-oriented industries and kindle researcher interest under the changes of socio-economic policy. To the latter belong high requirements to the data and necessity to avoid the data errors in DEA. Therefore the input-output data, reliability of those are proved by the audit reports, are considered here. Practical implications – The paper examines the impact of sharp political changes on industrial efficiency. Through the results of the analysis the recommendations for the decision making for the purpose of efficiency-improving in the consumer goods industry of Ukraine were formulated. Originality/value – This is the first paper that adopts DEA for measuring of efficiency in consumer goods industries of Ukraine under political changes.