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Industrial Agglomeration, Geographic Innovation and Total Factor Productivity: The Case of Taiwan

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Abstract

The paper analyses the impact of geographic innovation on Total Factor Productivity (TFP) in Taiwan. Using 242 four-digit standard industrial classification (SIC) industries in Taiwan in 2001, 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 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 industry characteristics and heteroskedasticity are controlled. Moreover, according to the endogeneity of geographic innovation, the Hausman test shows that the geographic innovation variable should be treated as endogenous, which supports the modern theory of industrial clustering about innovation spillovers within clusters.

Suggested Citation

  • Chia-Lin Chang & Les Oxley, 2008. "Industrial Agglomeration, Geographic Innovation and Total Factor Productivity: The Case of Taiwan," Working Papers in Economics 08/14, University of Canterbury, Department of Economics and Finance.
  • Handle: RePEc:cbt:econwp:08/14
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    File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/0814.pdf
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    Cited by:

    1. 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.
    2. repec:spr:anresc:v:59:y:2017:i:2:d:10.1007_s00168-017-0836-3 is not listed on IDEAS
    3. Chia-Lin Chang & Michael McAleer & Yu-Chieh Wu, 2015. "Industrial Agglomeration and Use of the Internet," Tinbergen Institute Discussion Papers 15-098/III, Tinbergen Institute.
    4. 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.
    5. repec:kap:iaecre:v:21:y:2015:i:1:p:41-54 is not listed on IDEAS
    6. 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.
    7. 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.
    8. 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.

    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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