DEA AND THE MANAGEMENT OF THE PRODUCT CYCLE - THE US COMPUTER INDUSTRY

The method of Data Envelopment Analysis (DEA) is applied to rank the e fficiency of U.S. computer companies during a 10-yr period. To reflect the dynamic setting of the computer industry, the inputs include inve stment in real capital and expenditures on R&D; the outputs are sales revenues, profits, and market capitalization. We develop a procedure f or studying the time path of the observed DEA ratings of a high tech c ompany over its product cycles. The empirical observations confirm the key relationship between efficiency and the product cycle. Since comp uter companies differ greatly in their success in managing their produ ct cycles, they will also show quite different efficiency results. A f ew companies, like Apple and Compaq, manufacturing products with long and sustained cycles, were consistently located at the efficiency fron tier. But most companies, spending heavily to bring on line a stream o f innovative products, were inefficient.