Non-Homogeneity in Data Envelopment Analysis and the Reference Set Restrictions

The limited comparability of production units is a practical managerial problem when conducting efficiency assessments and benchmarking. In this study, the problem of non-homogeneity is studied in the context of the data envelopment analysis, which is a well-known non-parametric method of efficiency evaluation. The original models of data envelopment analysis assume homogeneity of the production units under evaluation and homogeneity of the external environment. However, such assumptions do not often correspond to reality and may be too restrictive. The paper summarises twelve recommendations on how to deal with non-homogeneous production units and with non-homogeneous external environment. Above all, we investigate how the comparability of production units can be improved by introducing restrictions of the reference set into the model. However, no individual recommendation provides a universal solution, and it is necessary to consider the specific situation and the goal of the efficiency evaluation.