Data Envelopment Analysis - Essay Example

This paper would use the DEA method to measure the technical allocative efficiency. IT start-ups in China in particular and the rest of the world in general are faced with the same problem of initiating DEA methods to measure effectiveness of resource allocation processes and related outcomes. For instance according to Xu and Zhang (2008) the optimum resource input-output ratios are regarded as the best indicators of efficient resource allocation processes in the IT start-up firms that depend on strategic resource utilization and mobility between sectors to achieve positive organizational outcomes.

Gomes, de Mello and Meza (2008) use a hybrid approach based on DEA efficiency measurement thus highlighting the importance of large discreet resource allocation processes. This is a paradigm shift from the non-discreet statistical processes that were previously adopted by researchers to measure the optimum resource input-output ratios. In addition to these DEA methods there are other more advanced DEA models. Among them the most popular two models are known as the CCR model and the BCC model.

CCR has been named after its three discoverers Charnes, Cooper and Rhodes (1978) while BCC has been named after its discoverers Banker, Charnes and Cooper (1984). . The significance of each Decision Making Unit (DMU) in the resource allocation process is emphasized by the two models. However CCR makes the assumption that each DMU is capable of operating only at constant returns to scale while BCC assumes that there are variable returns to scale. This paper would use these two models for the analysis of the resource allocation efficiency in IT start-up firms (Graaf & Washida, 2006).

Though the paper would basically focus attention on Chinese IT firms there would be some analytical perspectives on other IT firms in the rest of the world as well. Actually this dichotomy between the two models has led to internal conflicts within firms as to which model has more merits than the other (Kaynak & Karakaya, 1994). The DMU consists of personnel who are Human Resource Management (HRM) specialists and production engineers and therefore are expected to work out the best or most efficient resource allocation process so that output would be maximized and cost minimized (Davenport, 1999).

The current literature on the subject actually generalizes the impact of this conflict on the DMU's own efficiency and impartiality. This outcome is further worsened by the fact that individual decision makers are much less inclined to coordinate efforts at each level of decision making though such decisions weigh heavily on the final organizational outcomes (Phillips, 2005). The negotiation process between and among the members of the DMU of each organization such as the new IT firm in China can be more specifically referred to as a culture-specific ritual in which rules are openly flouted in order to preserve one's own interests (Pour, 2006).

In fact IT industry analysts and experts agree that attitudes and