PUBLICATIONS & REPORTS

Contents Introduction

This paper examines the influence of three industry-level characteristics, producer concentration, exporting, and foreign ownership, on plant-level innovation in Taiwan’s electronics industries. Electronics plants are particularly important in Taiwan, accounting for particularly large portions of the exports and innovation and this case is thus of interest to many analysts and policy makers. After controlling for numerous plant-level factors affecting innovation, the results provide evidence of an inverted-U relationship between concentration and innovation, with concentration leading to higher innovation propensities in plants when concentration is low and lower innovation when concentration is high. These results also reveal evidence that plant-level innovation propensities tended to be relatively high in industries where export propensities and MNC presence were high, with the influence of exporting being somewhat larger than that of MNC presence. However, both of these relationships were much stronger in 2002-2003 than earlier years, and the relationship to MNC presence was most likely insignificant in 1998-1999.