Good management practices and technological heterogeneity: Impacts on technical efficiency in Peruvian sheep farming

This paper examines the effects of adopting Good Management Practices (GMPs) on the technical efficiency (TE) of Peruvian sheep farms, considering the technological heterogeneity resulting from diverse GMP adoption patterns. Using data from the 2022 Peruvian National Agricultural Survey, 943 sheep farmers were classified according to their GMP adoption stages through hierarchical cluster analysis, in line with the Diffusion of Innovation theory. Stochastic meta-frontier analyses were then applied to assess efficiency within each group, comparing them to industry-wide "best-practice" standards. The findings reveal a positive relationship between GMP adoption and technical efficiency, with farms in advanced GMP adoption stages showing the highest efficiency levels; however, these farms experienced only marginal efficiency gains, suggesting that adopting more advanced GMPs did not significantly expand the production frontier. The relatively high variability in within-group TE scores among these later adopters may indicate a learning curve, contributing to increased production risks. Moreover, within-group TE scores were found to be the primary drivers of overall (or meta technical) efficiency, implying that inefficiencies stem more from management shortcomings than from technological constraints. This highlights the need to enhance management practices. The study concludes that farms at all stages of GMP adoption have significant room to improve efficiency with current resources and recommends that policymakers and extension services focus on helping farmers better utilize existing GMP technologies while promoting advanced practices to reduce potential adjustment costs.