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Industrial agglomeration, geographic innovation and total factor productivity: The case of Taiwan

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  • Chang, Chia-Lin
  • Oxley, Les

Abstract

The paper analyses the impact of geographic innovation on total factor productivity (TFP) in Taiwan in 2001 using 242 four-digit standard industrial classification (SIC) industries. We compute TFP by estimating Translog production functions with K, L, E and M inputs, and measure the geographic innovative activity using both Krugman's Gini coefficients and the location Herfindahl index. We also consider the geographic innovation variable as an endogenous variable and use two stage least squares (2SLS) to obtain a consistent, albeit inefficient, estimator. The empirical results show a significantly positive effect of geographic innovation, as well as R&D expenditure, on TFP. These results are robust for the Gini coefficients and location Herfindahl index, when industrial characteristics and heteroskedasticity are controlled. Moreover the Hausman test shows that the geographic innovation variable should be treated as endogenous which supports the modern theory of industrial clustering regarding innovation spillovers within clusters.

Suggested Citation

  • Chang, Chia-Lin & Oxley, Les, 2009. "Industrial agglomeration, geographic innovation and total factor productivity: The case of Taiwan," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 79(9), pages 2787-2796.
  • Handle: RePEc:eee:matcom:v:79:y:2009:i:9:p:2787-2796
    DOI: 10.1016/j.matcom.2008.09.003
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    References listed on IDEAS

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    Cited by:

    1. Yang, Chih-Hai & Lin, Hui-Lin & Li, Hsiao-Yun, 2013. "Influences of production and R&D agglomeration on productivity: Evidence from Chinese electronics firms," China Economic Review, Elsevier, vol. 27(C), pages 162-178.
    2. repec:kap:iaecre:v:21:y:2015:i:1:p:41-54 is not listed on IDEAS
    3. Jiří Mihola & Petr Wawrosz & Jana Kotěšovcová, 2015. "Is the most innovative firm in the world really innovative?," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 21(1), pages 41-54, March.
    4. Chia-Lin Chang & Michael McAleer & Yu-Chieh Wu, 2015. "Industrial Agglomeration and Use of the Internet," Documentos de Trabajo del ICAE 2015-09, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    5. Chia-Lin Chang & Michael McAleer & Yu-Chieh Wu, 2016. "A Statistical Analysis of Industrial Penetration and Internet Intensity in Taiwan," Tinbergen Institute Discussion Papers 16-031/III, Tinbergen Institute, revised 07 Jan 2018.
    6. Chia-Lin Chang & Michael McAleer & Yu-Chieh Wu, 2016. "Industrial penetration and internet intensity," Documentos de Trabajo del ICAE 2016-06, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    7. Chang, Chun-Ping & Lee, Chien-Chiang & Hsieh, Meng-Chi, 2015. "Does globalization promote real output? Evidence from quantile cointegration regression," Economic Modelling, Elsevier, vol. 44(C), pages 25-36.
    8. repec:spr:anresc:v:59:y:2017:i:2:d:10.1007_s00168-017-0836-3 is not listed on IDEAS

    More about this item

    Keywords

    Industry agglomeration; Geographic innovation; Total factor productivity; Cluster; Research and development;

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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