X-efficiency is a measure of the efficiency of a firm or organization in terms of producing output given its inputs, such as labor, capital, and technology. It refers to the degree to which a company is able to produce the maximum possible output with the minimum amount of input, or to produce a given level of output using fewer inputs than its competitors.

X-efficiency is closely related to technical efficiency, which measures the extent to which a firm is able to produce the maximum possible output using its current technology. However, X-efficiency goes beyond technical efficiency to consider the extent to which a firm is able to optimize the use of its inputs and make the most of its resources.

X-efficiency can be improved through a variety of means, such as improving management practices, investing in new technology or equipment, optimizing production processes, and improving employee training and motivation. A firm that is highly X-efficient is likely to be more competitive and profitable than its less efficient competitors, as it is able to produce the same output at a lower cost, or produce more output with the same resources.