R&D Expenditure, Spillovers and Productivity-Empirical Study of Taiwanese Optoelectronic Industry

Abstract

In prior research on the productivity of Taiwanese optoelectronic industry as determined by panel data, the Cobb-Douglas production function and R&D spillovers are rarely discussed. Therefore, this paper examined the effects of R&D expenditure and R&D spillovers on productivity in the Taiwanese optoelectronic industry to explore. This paper constructed firm-level panel data of the Taiwanese optoelectronic industry from 2000 to 2018, and used Griliches and Mairesse (1979) extended Cobb-Douglas production function for our empirical framework. Then we chose the fit fixed effect or random effect model for our panel data by testing the empirical model. Besides the full-sample analysis, this paper divided our sample into the four sub-samples of optoelectronic information, display, component and communication to detect the difference from each group on productivity. The empirical results suggested that for both the total sample and the sub-samples of the optoelectronic industry, R&D expenditure and R&D spillover effects have positive contributions to productivity. Although Taiwan’s optoelectronic industry has considerable assembly application capabilities and a complete background of related industries, the mastering of core technology and the development of key components still need to be strengthened. Based on strong photo-electronics, information and manufacturing capacities, an in-depth study should be carried out by integrating these different fields and focusing on intellectual properties to create applications with high added value, high precision and a high price through R&D innovations. In this way, Taiwan manufacturers can contribute to the market and promote overall social and economic development.