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Procedia Technology 8 (2013) 503 507

6th International Conference on Information and Communication Technologies in

Agriculture, Food and Environment (HAICTA 2013)

Productivity and Efficiency in the Agri-food Production Industry:

the Case of Fisheries in Greece
Fotini Voulgarisa,*, Christos Lemonakisa
a
Department of Finance and Insurance, School of Management & Economics,T.E.I. of Crete , Agios Nikolaos Branch, P.O Box 128 , 72100
Agios Nikolaos, Greece.

Abstract

The research is based on financial data of 168 aquaculture firms 133 of them involved in fish farming and 35 vertically integrated
in the production of frozen fish. The period of analysis covers the period 2002-2011. Financial data for those firms were collected
from the ICAP Hellas. The results suggest that productivity increases with the size of the firm; age is not a significant
determinant while exports are critical for their productivity, as well as profitability. Efficient management of resources is also
important, as well as profitability and productivity can promote the competitiveness of Greek fisheries.
2013
2013The
TheAuthors.
Authors. Published
Published by by Elsevier
Elsevier Ltd.B.V.
Open access under CC BY-NC-ND license.
Selectionand
Selection andpeer-review
peer-review under
under responsibility
responsibility of HAICTA.
of The Hellenic Association for Information and Communication Technologies in Agriculture
Food and Environment (HAICTA)
Keywords: Fisheries; Productivity; Efficiency; Greek agri-food production industry;

1. Introduction

Fisheries play important role in providing food and income in many EU countries, either as a stand-alone activity
or in association with crop agriculture and livestock rearing. Greece is an economy in crisis in high need of exports
and fisheries can help in increasing the countrys exports, contributing to its GNP growth and job creation. Greece is
the main country producer of Mediterranean fish and maintains a stable share that is greater than 40% of the EU-27
production. The sector is oligopolistic with the 5 largest companies accounting for 3/4 of aggregate sales, benefiting
from economies of scale in production. The 5 largest Greek fisheries are ranked among the largest European ones.
Greek fish farming is export-oriented and one of the major export sectors of the Greek economy, with exports

*
Corresponding author. Fotini Vourgaris: Tel: +30-2841-091-101, +30-2841-082-884; Fax: +30-2841-082-879.
E-mail address: fvoulgari@staff.teicrete.gr

2212-0173 2013 The Authors. Published by Elsevier Ltd. Open access under CC BY-NC-ND license.
Selection and peer-review under responsibility of The Hellenic Association for Information and Communication Technologies in Agriculture
Food and Environment (HAICTA)
doi:10.1016/j.protcy.2013.11.067
504 Fotini Voulgaris and Christos Lemonakis / Procedia Technology 8 (2013) 503 507

amounting to 80% of the total production mainly to Europe. Given the importance and the competitive advantages
of the sector in Greece, it is important to analyze the productivity and technical efficiency and the factors affecting it
and how they can help aquaculture industry to achieve a sustainable growth and help Greek economy to overcome
its crisis.
The aim of this paper is to analyze labor productivity and fixed assets efficiency in the Greek fisheries sector and
the factors affecting it. The issue is going to be examined in both the pro and the post economic crisis era, based on
firm level financial data. The effect of specific macro variables, European Union 27- countries fish production and
tourism activity in Greece, are also included in our analysis.

2. Theory and literature review

In most fisheries productivity studies, the methods used are DEA or Stochastic Frontier Analysis, where it is
examined to what extend a firm that uses several inputs and produces several outputs, is efficient in the way it
allocates its resources, [9] and [12].
Sharma and Leung [16] used cross sectional econometric analysis using to analyze efficiency in fisheries.While
the competitiveness of geographical regions is measured in several ways; a micro level competitiveness index does
not appear in the literature. Productivity is associated with competitiveness, especially in fisheries where costs are
essential in determining prices and the world competition is based mainly on that. Quality of fish is also very
important, but given the quality of the Greek fish, the emphasis should be placed on efficient allocation of firms
resources and productivity. Production is a function of labour and capital. A number of other variables such as raw
material, area and energy are closely related to the production process. According to Baten et al. [4], [5], Bhandari
and Maiti [6], these are independent variables to the production function. Labour is used in terms of wages, but for
the present study is measured in terms of number of employees, due to non-availability of other data. Additionally,
in line with literature, various financial performance measures are used to measure competitiveness of firms ([7],
[8], [18], [1]). The advantage of financial performance measures are the easiness of calculation.
According to Peteraf [14] the most commonly used indicators of competitiveness of a firm are operating
performance, market performance and profitability. Operational ability is mainly determined by productivity, cost
efficiency, competitive prices, product quality and flexibility..

3. Data and Methodology

The research is based on financial data of 168 aquaculture firms 133 of them involved in fish farming and 35
vertically integrated in the production of frozen fish. The differences in fixed assets employed among the two
categories are found as non-significant, therefore the sample is considered as homogeneous. The period of analysis
covers the period 2002-2011. Financial data for those firms were collected from the ICAP Hellas, a private data base
in Greece. Descriptive statistics in table 1 below show some financial characteristics of the sector, in terms of the
variables used in the model for the research period. They indicate that the average age of the fishing firms is around
20 years, but with a high variance, the youngest being 5 years of age. In table 1, descriptive statistics are given for
the period before and after the crisis. The deterioration of financial performance of Greek fisheries is obvious.
Although, according to literature, fisheries efficiency investigation, the method used is mainly through DEA and
SFA in the empirical analysis in this study, we used the Panel EGLS method with diagonal correction of standard
errors for heteroscedasticity and autocorrelation (according to the White methodology), to identify the relationship
among the firm level attributes and the productivity-efficiency. The reason for using econometric approach is to
detect differences in productivity-efficiency caused by the management of resources of the firms, emphasizing
managerial capability, along with age and size DEA calculates an efficient score, while EGLS modeling measures
the effect of internal plus external critical factors on productivity and efficiency of fisheries.
 Fotini Voulgaris and Christos Lemonakis / Procedia Technology 8 (2013) 503 507 505

Table 1. Descriptive statistics pro and after the crisis in Greece

Variables Period Mean Maximum Minimum St. Dev.
Working PRO 1,7984 6,2672 -1,6007 0,267
Capital/Total
AFTER -0,1599 1,8521 -1,8553 0,9498
Sales
Total PRO 5,9211 8,9101 0,0058 0,0642
Sales/Fixed
AFTER 2,088 5,9508 0,009 0,0838
Assets
Return on PRO 0,05882 0,8208 -1,0714 0,0106
Equity AFTER -0,0406 0,4262 -4,324 0,0255
PRO 0,2019 0,9998 0,0121 0,0231
Capitalization
AFTER 0,3941 0,9556 0,0212 0,0259
PRO 3,6888 3,9837 -2,578 0,0168
Leverage
AFTER 8,0708 8,9184 -9,1832 0,0508
Total Sales in PRO 8.163.203,14 218.253.286,00 14.322.120,00 147.217,13
euro AFTER 5.296.607,65 185.179.760,00 6.500.000,00 219.249,55
PRO 0,1216 0,9585 -1,5014 0,0618
Markup
AFTER 0,0726 0,8499 -3,5783 0,03814
Fishery PRO 7022720,667 7593766 6486319 361619,9534
Production AFTER 3199462 6428168 0 3201912,086
PRO 9211,66 9531 8666 293,75
Tourism
AFTER 23700,75 28708 9706 8091,44
Total Assets in PRO 28.302.199,98 489.436.920,00 5.437.000,00 276.287,29
euro AFTER 13.088.211,85 410.355.490,00 2.438.100,00 465.592,86

This is the novelty of the study. The study uses two models; one with dependent variable used is Productivity,
measured in terms of Total Sales over number of employees and the other with technical efficiency as dependent
variable measured in terms of Total Sales over Fixed Assets. The independent variables used in the models are the
following:
1. Size: It is measured as natural logarithm of Total Assets.
2. Age: This is measured as year t minus year of establishment
3. Leverage: measured as Total Debt / Total Liabilities, leverage shows the level of firm indebtedness, both in
short term and long term funds.
4. Ability to pay its fixed obligations or Interest coverage ratio (EBIT_INTEREXP): measured as
EBIT/interest expense and lease obligations, used as a proxy of financial risk in the firm.
5. Efficiency (technical): taken as Total Sales /Fixed Assets
6. Capitalization: This is measured as Fixed Assets / Total Assets; it shows the firms capital intensiveness
7. Exporting: dummy variable that takes value 1 for export and 0 for non-export activity.
8. Crisis Dummy (CD): a dummy variable taking the value of 1 for the period 2008-2011 and 0 for the pro
crisis period, years 2002-2007(after the countrys entrance in the Euro zone).
9. Working capital/Total Sales (WC_TS): a variable representing operating liquidity
10. Markup or gross profit margin: It equals to Total Sales minus Cost of goods sold over Total Sales.
11. Fishery Prod_EU (FP_EU): Greek fisheries exports over Total Fishery Production - Total all Fishing
Areas-European Union (27 countries), as taken from the Eurostat database.
12. Tourism turnover: Number of tourism nights - national - annual data as taken from the Eurostat database
Based on the above variables we used the following models (1) and (2):

Productivityi,t =a 0 +a1Agei,t +a 2 Period i,t +a 3 Export i,t +a 4 Capitalization i,t +a 5 WC_TSi,t +

(1)
+a 6Sizei,t +a 7 EBIT_INTEREXPi,t

Efficiencyi,t =a 0 +a1 Agei,t +a 2 Periodi,t +a 3 Export i,t +a 4 Capitalization i,t +a 5 WC_TSi,t +

(2)
+a 6Sizei,t +a 7 EBIT_INTEREXPi,t

4. Results

Table 2 describes the results of the regression model with dependent variable labour productivity. There is no
506 Fotini Voulgaris and Christos Lemonakis / Procedia Technology 8 (2013) 503 507

indication that the data structure is characterized by period specific heteroskedasticity.

Table 2: Regressions Results-Productivity as the Dependent Variable

Model 1 Model 2
Labour Productivity Efficiency in F.A.
as the dependent variable as the Dependent Variable
Variable Coefficient Prob. Coefficient Prob.
C -6,2485 0,0001 (***) -14,1845 0,0000 (***)
Age 5,9108 0,1064 -0,0040 0,2867
Period 2.3890 0,0000 (***) 0,8443 0,0230 (**)
Export 3,1140 0,0000 (***) 0,0131 0,9456
Capitalization -1,8824 0,0000 (***) -1,13546 0,0000 (***)
WC_TS -7,7959 0,0000 (***) -0,0312 0,2830
Size 1,4252 0,0000 (***) -0,4988 0,0000 (***)
EBIT_INTEREXP 1,2314 0,0462 (**) 0,0221 0,0161 (**)
Markup 3,1153 0,0003 (***) 0,3161 0,0750 (*)
Leverage -0.3104 0.9975 0,0148 0.0891 (*)
FP-EU -5,1208 0,0008 (***)
Tourism 0,2062 0,0838 (*) -3,7205 0,0501 (**)
R-squared 0,6386 0,8128
F-statistic 174,9796 442,86
Prob(F-statistic) 0,0000 0,0000

Where, (*) is the Significance at the 10% level (two-tailed test), (**) is the Significance at the 5% level (two-
tailed test), and (***) the Significance at the 1% level (two-tailed test). Standard errors are White
heteroskedasticity consistent.

The findings of the research suggest that firm specific characteristics such as size, exports and gross profit margin
are positive determinants of productivity in fisheries in Greece, as expected. However, high investment in fixed
assets is associated with negative productivity due to diseconomies of scale in the case of small size firms. High use
of working capital decreases productivity, acting as an indication of low managerial capability in the use of firms
funds. From the external factors, increase in tourism demand is contributing to sales volume increase and better use
of labor. The crisis dummy, taking the value of 1 for the after crisis period and the value of 0 for the before crisis
period, indicates that the severe crisis conditions in Greece have affected the productivity performance of those
firms.
In the second model, the results suggest that, fixed assets efficiency is determined positively by exports, ability to
repay its debt obligations, gross profit margin and leverage. This means that fish farming firms which can borrow
and are able to repay their debts (they have credibility and a healthy financial condition), with high gross profit
margin can attain higher efficiency in fixed assets. Combined with the fact that size and fixed assets capital intensity
are found to be negatively related to fixed assets efficiency, we could conclude that small size firms with low
investments in fixed assets are the ones that can be more efficient in terms of productive assets. Increase in
competition from EU-27 affects negatively capital efficiency, due to decrease in export sales. However, it is
interesting that tourist visitors have a negative effect. One possible explanation is that higher demand from tourism
can push fish farming firms into new fixed assets investments which could result in an accumulation of capital stock
when tourism demand decreases, showing capital asset inefficiency. Finally, the effect of crisis on capital efficiency
also came out as significant. Crisis has affected negatively fixed assets efficiency in Greek fisheries.

5. Conclusions

The research was based on financial data from the financial statements of 168 aquaculture firms for the period
2002-2007. We used a generalized econometric least square model for data analysis, to identify the most significant
variables of firm productivity and efficiency. The results of the study suggest that productivity increases with the
size of the firm, age is not a significant determinant, exports are critical for their productivity, as well as
profitability. Efficient management of resources is important. Profitability and productivity can measure and
promote, to a large extend the competitiveness of Greek fisheries. In terms of capital efficiency, small Greek
fisheries with low fixed assets, good financial condition and export orientation, can be efficient in terms of capital
 Fotini Voulgaris and Christos Lemonakis / Procedia Technology 8 (2013) 503 507 507

assets invested.
Therefore, the policy implications derived from the findings, suggesting that, managers of fisheries in Greece
should strive for efficient use of their resources and control of production expenses. They should make reasonable
use of debt, keeping company; s risk at low level. Fisheries in Greece are not capital intensive and should be kept
that way, however putting emphasis on new technology and trained good quality labor force.
Special attention should be given by the State to this sector of the agricultural industry, to help the economy to
overcome its crisis and achieve economic growth.

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