The Formation of Electronics and IT Industry Clusters in Taiwan

Abstract

Taiwan's hi-tech sector has grown rapidly; the expansion of the electronics and IT industry has been particularly impressive. Since the late 1970s, the electronics and IT industry has been positioned by the Taiwanese government as a key strategic industry the development of which should be prioritized, and today this industry is one of the most important contributors to the growth of the Taiwanese economy as a whole. Taiwan's hi-tech sector is mainly located in Northern Taiwan, where a major “hi-tech corridor” has emerged. Besides examining how Taiwan's hi-tech sector has evolved over time, the present study also explores electronics and IT industry cluster development in Northern Taiwan. Using the results of a questionnaire survey on the industry cluster effect, inter-enterprise collaboration and technology innovation that was administered in late 2006, the study seeks to identify the salient characteristics of Taiwan's electronics and IT industry clusters. The study finds that active promotion of technology innovation is associated with enterprises that have been in existence for a relatively short time, those where the chairman or CEO has studied overseas, those where a high percentage of the company's shares are held by foreign investors, and those that are geographically close to their customers and suppliers. In addition, being located in an industry cluster, having a high percentage of shared held by foreign investors, and being located close to customers and suppliers are all associated with superior earnings performance.JEL Classification: O31, O53