Abstract
The main purpose of this study aims to discuss the effect of agglomeration externalities on firm productivity in the Taiwan’s Electronics Parts and Components industry. We first construct the EG index by using data on total employment in each city and industry of Taiwan from the Factory Operation Census during the period of 2003 to 2012. The mean value of EG index is 0.019 which is defined to be the lowly concentrated industry. In addition, we find that firms in the Electronic Parts and Components industry are more likely locate in the northern part of Taiwan. By using data on public listed companies in Taiwan, we examine the effects of agglomeration externalities on firm productivity. We find that agglomeration externalities have positive effects on firm productivity. Moreover, the positive contributions of agglomeration externalities to firm productivity are larger for firms with EG indices in the middle ranges than for firms with high or low EG indices. Finally, we find that the positive effects of agglomeration externalities on firm productivity are smaller in markets with a high HHI index.