This paper studies the relationship between job turnover and technical efficiency of state-owned enterprise (SOEs) in Shanghai's manufacturing sector during the period of 1989-1992. Data Envelopment Analysis (DEA) is used to compute measure of technical efficiency for each enterprise. Our findings indicate that, for non-expanding SOEs, the relationship between job turnover (i.e., downsizing) and technical efficiency is a U-shaped one such that efficiency declines at low levels of turnover,but after a certain level, it starts to increase. In addition, we show that small non-expanding SOEs (i.e., with employment size less than 100) start to increase their efficiency at a lower level of turnover than other medium and large SOEs. We also find that for medium and large expanding SOEs, the turnover-efficiency relationship is a positive and linear one.
Chow, K. W. C., Fung, K. Y. M., & Ngo, H. Y. (2002). Can job turnover improve technical efficiency?: A study of state-owned enterprises in Shanghai (HKIBS Working Paper Series 049-012). Retrieved from Lingnan University website: http://commons.ln.edu.hk/hkibswp/35