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Contents Introduction

This paper analyzes interactions between producer concentration and research and development (R&D) activities of Taiwanese firms at the industry level. The paper first documents how producer concentration has varied across manufacturing industries over the last 2 decades or so. Then, it provides the analysis of correlation between firm concentration ratios and R&D-sales ratios. Although in Schumpeter’s discussion, it is hypothesized that innovation increases with market concentration, a review of the empirical studies on this issue reveals that there are weak correlations between markets structure and innovative activities. The analysis of this paper also supports it, namely, clarifying that industrial concentration is not an independent and significant determinant of R&D intensity. In order to have a better understanding, it will be suggested that we might have to focus on the other factors such as the type of market demand, technological opportunity, and business model, the examination of which needs more accumulation of field researches as well as numerical analyses.