Benchmarking the efficiencies of Indonesia’s municipal water utilities using Stackelberg data envelopment analysis
Abstract
Purpose
The purpose of this paper is to present a yardstick efficiency comparison of 269 Indonesian municipal water utilities (MWUs) and measures the impact of exogenous environmental variables on efficiency scores.
Design/methodology/approach
Two-stage Stackelberg leader-follower data envelopment analysis (DEA) and artificial neural networks (ANN) were employed.
Findings
Given that serviceability was treated as the leader and profitability as the follower, the first and second stage DEA scores were 55 and 32 percent (0 percent = totally inefficient, 100 percent = perfectly efficient), respectively. This indicates sizeable opportunities for improvement, with 39 percent of the total sample facing serious problems in both first- and second-stage efficiencies. When profitability instead leads serviceability, this results in more decreased efficiency. The size of the population served was the most important exogenous environmental variable affecting DEA efficiency scores in both the first and second stages.
Research limitations/implications
The present study was limited by the overly restrictive assumption that all MWUs operate at a constant-return-to-scale.
Practical implications
These research findings will enable better management of the MWUs in question, allowing their current level of performance to be objectively compared with that of their peers, both in terms of scale and area of operation. These findings will also help the government prioritize assistance measures for MWUs that are suffering from acute performance gaps, and to devise a strategic national plan to revitalize Indonesia’s water sector.
Originality/value
This paper enriches the body of knowledge by filling in knowledge gaps relating to benchmarking in Indonesia’s water industry, as well as in the application of ensemble two-stage DEA and ANN, which are still rare in the literature.
Keywords
Acknowledgements
The first author is indebted to the Alexander von Humboldt Foundation for providing a postdoctoral fellowship under the Georg-Forster for Experienced Researchers program. This paper was completed during the first author’s third research stay at the Chair of Construction Economics, Bauhaus University in Weimar. The authors would also like to express their gratitude to three anonymous reviewers for their useful comments and suggestions that improve the quality of this paper.
Citation
Wibowo, A. and Alfen, H.W. (2015), "Benchmarking the efficiencies of Indonesia’s municipal water utilities using Stackelberg data envelopment analysis", Benchmarking: An International Journal, Vol. 22 No. 4, pp. 588-609. https://doi.org/10.1108/BIJ-01-2014-0009
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited