Abstract
One of the main objectives of land-use and transport models is to accurately describe the organization and composition of the regional economy. However, these models currently lack the integration of competitiveness and performance of the regional economy, which in-turn is dependent on performance and efficiency of business establishments in the region. In this study, we present a framework that integrates the aspects of economic efficiency of business establishments within the context of land-use and transport models. For this purpose, we comprehensively assess the impacts of both internal and external attributes of business establishment on its efficiency. In this process, we specifically focus on aspects of incorporating locational characteristics using two frameworks - (a) measuring locational attributes using link-based multiple centrality indicators (L-MCI) and (b) measuring neighborhood effects of business establishments through spatial proximity that account for co-location and competition. We make use of the stochastic frontier modeling framework to investigate the factors impacting business establishment-level output measured as sales per unit area. Specifically, the aspatial stochastic frontier (ASF) model incorporates L-MCI measures as covariates and the spatial stochastic frontier (SSF) model incorporates neighborhood effects of business establishments through network distance measured using the roadway network for Santa Barbara County.
Overall, the empirical results suggest that there exist significant inefficiencies across all business establishment types that are mainly impacted by internal attributes of the business. For example, larger and older business establishments are more efficient than business establishments that are smaller in size and younger in age. Furthermore, the results also suggest that locational impacts are better captured using the ASF specification when compared with SSF specification. For instance, the spatial correlation estimate (from SSF) although statistically significant, is very weak. Thereby, indicating a lack of spatial structure in technical efficiency of businesses manifested in the form of co-location and competition. In contrast, the ASF model captures spatial structure of technical efficiency thoroughly with inclusion of the L-MCI measures. This indicates that L-MCI measures have varying levels of impact on efficiency (positive or negative) depending on its relative location in the region. For instance, retail trade businesses have higher levels of revenue (or sales per unit area) when located along links in a grid-network like structure e.g. downtown areas. Additionally, businesses in professional services have no impact on their efficiency based on the configuration and structure of the regional transportation network. However, results from both specifications indicate that there exist major benefits on efficiency of business establishments from local competition for retail trade and healthcare services.