Abstract
Innovation is widely recognized as the main stimulus of economic growth. Considering that Taiwan has devoted increasingly more efforts to R&D since the late 1980s, a crucial question is posed: did the R&D productivity of firms begin to decline in Taiwan during the post-Asian Financial Crisis period when Taiwan's economic growth began to decelerate? This study investigates changes in R&D productivity for Taiwan's manufacturing firms from 1990 to 2003. By employing various approaches to obtain robust results, findings from firm-level microeconometric analysis suggests that overall R&D productivity in Taiwan appears to have been ascendant, particularly during the post-crisis period. This result is also evidenced by segmenting the sample into industry groups, whereby electronics firms have a significantly high R&D productivity growth relative to firms outside the electronics industry. Therefore, the slowdown of Taiwan's economic growth in the past decade is attributed to other influences rather than a slowdown in R&D productivity.
Highlights
Innovation, as supported in relevant empirical literature, is widely recognized as a major stimulus of economic growth1
The extraordinary post-war growth might be principally attributed to factors that accumulated before the 1990s, and tremendous technological progress has significantly contributed to economic growth in the past two decades
Considering the importance of innovation to economic growth, the question remains: Is the decline in economic growth caused by a decline in R&D productivity? This study posed this question and answered it by conducting microeconometric analysis
Summary
Innovation, as supported in relevant empirical literature, is widely recognized as a major stimulus of economic growth. Based on the law of decreasing returns, if R&D productivity exhibits a decline, one country alone cannot experience long-term economic growth, regardless of whether it continues to engage in R&D activities. Using data for the six Asian miracle economies from 1953 to 2006, Ang and Madsen (2011) evidenced that R&D growth and R&D intensity have influenced Asian growth5 These results cast doubt on the assumption of diminishing returns to knowledge, and the implications of R&Dbased theories remain unclear, for developing economies. The main purpose of this study was to determine whether R&D productivity declines in a newly industrialized economy (NIE), in Taiwan This question is critically relevant for Taiwan’s long-term economic growth. Concluding remarks and policy implications are summarized in the final section
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