Using a hybrid two‐stage DEA model to analyze the profitability and marketability of medical manufacturing firms

The purpose of this study is to develop a modification of the model developed by Chen and Zhu in 2004. Calculating stage and overall efficiencies precisely and consistently has become a major challenge of the two‐stage DEA model. However, most other models do not calculate the optimality of intermediates. Although the model developed by Chen and Zhu measures the optimality of intermediates, the calculated efficiency scores still have some shortfalls. The modified model, named the hybrid two‐stage DEA model, fills the gap between calculating the optimality of intermediates and the consistency of overall efficiency scores. In addition to obtaining an accurate measurement for the optimality of intermediates, the model confines efficiency scores to a range from zero to one (a ratio efficiency score). In an empirical evaluation, we use data from 64 medical manufacturing firms to test the performance of the hybrid model and offer recommendations for the industry.