Academic journal article Contemporary Economic Policy

Knowledge Spillovers and High-Technology Clustering: Evidence from Taiwan's Hsinchu Science-Based Industrial Park

Academic journal article Contemporary Economic Policy

Knowledge Spillovers and High-Technology Clustering: Evidence from Taiwan's Hsinchu Science-Based Industrial Park

Article excerpt

I. INTRODUCTION

Regarding the recent clustering phenomenon, it is especially surprising that clustering is particularly strong in the case of firms in high-technology (high-tech), information-intensive sectors, sectors which one might expect, given the enormous recent developments in the new information technologies, to show the least sensitive need for geographical proximity (Audretsch and Feldman, 1996; Baptista, 2000; West, 2000). The endogenous growth theory and innovation theory have stressed the importance of knowledge spillovers and provided important perspectives in favoring industry agglomeration. Griliches (1986), Grossman and Helpman (1991), Krugman (1991), and Romer (1986), among others, focused on the role of knowledge spillovers across agents and firms in generating increasing returns and ultimately economic growth. In industrial clustering, as Saxenian (1994) documented for Silicon Valley, there is a substantial degree of information sharing across those entrepreneurial firms. On the other hand, the entrepreneurial firms in industrial clustering compete in innovation and thus their activities are fundamentally substitutes.

More recent studies have also identified the existence of spatially mediated knowledge spillovers in industrial clustering. An important finding of Acs et al. (1992, 1994), Jaffe (1989) and Romer (1990) is that there are strong "spillovers" from aggregate innovative activity in a region to the research intensity of individual industries. As Baptista (1999), Feldman (1994), and Porter (1990) argued and empirically verified (see Audretsch and Feldman, 1996; Baptista, 2000; Glaeser et al., 1992), the geographical concentration of rivals enhances competitiveness and stimulates innovative activity, firm growth, and entry.

Recently much written attention has been given to the rise of technologically dynamic industrial regions. These regions are characterized by the spatial clustering of small firms into flexible production networks that have the ability to quickly respond to changing global markets. Competitive and successful industries usually occur in the form of clusters of industries that are linked together through vertical or horizontal relationships. The transmission of new technological knowledge works better within geographical boundaries because this kind of knowledge has a tacit and uncodified nature (Lund, 1988).

Tassey (1991) proposed that networking is essential for the development of a region's knowledge infrastructure. Pressures from social emulation and a localized competitive environment lead firms to adopt a new technology in order to "stay in the game." Ebadi and Utterback (1984) demonstrated that network cohensiveness is positively correlated to the degree of innovative success. Midgley et al. (1992) found that cohensiveness (defined as direct user-to-user influence) has a positive impact on the diffusion of industrial innovations.

While there is considerable evidence supporting the existence of knowledge spillovers and spatial spillovers, little attention has been paid--especially in the empirical context--to the spillover effects on industry clustering and associated economic performance. We address these issues for Taiwan's high-tech industries, focusing on the high-tech firms clustering in Taiwan's Hsinchu Science-based Industrial Park (HSIP). We define a regional cluster as a spatial and sectoral concentration of firms, and we measure the knowledge spillovers among firms in the spatial and sectoral perspectives. The purpose of this article is to assess the spillover mechanism and its associated cost effects in the clustering of Taiwanese high-tech firms in the HSIP. And we empirically examine the extent to which the clustering of the industrial activities in the HSIP is linked to the existence of knowledge spillovers.

In this article we provide a conceptual and empirical framework for measuring and evaluating various types of knowledge spillovers, which allows us both to quantify their cost effects and evaluate their contribution to industry clustering. …

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