Does higher technical efficiency induce a higher service level? A paradox association in the context of port operations

Abstract

Researchers and practitioners are benchmarking technical efficiency of ports and exploring the drivers of high efficiency. Paradoxically, this study argues that high technical efficiency (TE = 1) is not always essential, but an optimal level needs to be achieved while balancing the port service level. This study applies data envelopment analysis (DEA) and free disposal hull (FDH) methods to perform efficiency rankings of 38 container terminals from 17 different ports in 12 Asian countries. Four terminals are technically efficient (TE = 1) in all frontier approaches, thereof one Bangladeshi, one Chinese, one Indian and one Vietnamese. Furthermore, this study presents a case study combining qualitative and quantitative data analysis to investigate the characteristics of a port hosting high technically efficient container terminals. The finding suggests that ports with growing throughput, not investing actively in infrastructure and equipment, become high technically efficient over time, but the higher their technical efficiency, the lower their service level.