This study analyzes the drivers of technical efficiency across Turkish two-digit manufacturing industries by applying a Stochastic Frontier Model (SFM) with inefficiency effects for the 2019–2024 period. Return on Assets (ROA) is used as the frontier output to capture sector-level profitability and performance differences. The model incorporates financial, structural, and innovation-related indicators to explain both the profit frontier and deviations from it. The results show that liquidity and inventory turnover significantly strengthen profitability, while higher leverage limits the ability of industries to reach their optimal performance levels. The inefficiency model indicates that stronger equity-based capital structures—measured by the fixed-assets-to-equity ratio—and higher interest coverage reduce inefficiency, highlighting the importance of financial robustness. R&D investment is found to be a key source of efficiency gains, underscoring the role of innovation in enhancing competitiveness. In contrast, higher operating expenses increase inefficiency, revealing persistent cost-structure challenges. The COVID-19 pandemic is shown to worsen efficiency across most industries. Variance estimates confirm that inefficiency accounts for roughly 39% of performance variation, indicating meaningful departures from the profit frontier. The study concludes by emphasizing policies that promote equity financing, innovation, financial risk management, and operational modernization to strengthen efficiency and resilience in Turkish manufacturing.
Savehdarbandsari et al. (Mon,) studied this question.