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This paper examines the impact of the adoption of Flexible Manufacturing Technology (FMT) on the Technical Efficiency of Malaysia Manufacturing Industry. Owing to the potential multicollinearity, the Principal Component Analysis has been adopted to extract the most appropriate underlying dimensions of FMT in an effort to substitute the eight FMT variables. The study has been conducted within FMT intensively adopted 16 three-digit industries that encompass 50 five-digit industries covering the years 2000-2005. The results obtained from the two situations, one, including the industry fixed effects dummy variables and the other without these, are contrasted. It is found that the model that included the industry fixed effect dummy variables possesses a greater explanatory power. The two principal components that account for the greater variation in FMT show positive and moderately significant relationship with TE. The study concludes with sufficient evidence that FMT has a direct and moderately significant relationship with TE

A Frontier Approach to Measuring Impact of Adoption of Flexible Manufacturing Technology on Technical Efficiency of Malaysian Manufacturing Industry