Abstract
Taiwan’s high-tech firms have gradually agglomerated in several key regions since the Hsinchu Science-based Industrial Park (HSIP) was established. Based on the concepts of urbanization externality and localization externality, this thesis investigates whether a firm can improve its competitiveness by being located in a district of high industrial agglomeration. Therefore, this thesis evaluates the effects of industrial agglomeration on various indices of a firm’s performance. Utilizing the 1995, 1997, 1998 and 1999 Industrial Statistical Survey Report,this thesis focuses on the industries of precision technology, semiconductor, communication and computer. We utilize Holmes (1999) to calculate the degree of industrial agglomeration by classifying firms into the same industry, relevant industries and unrelated industries.We adopt the two factor fixed panel model to estimate the effect of industrial agglomeration as well as the effects of other firm characteristics, including R&D, sales, market shares and a firm’s age, on a firm’s performance. Our empirical results prove that a firm receives a higher externality and more advantages to performance when more of firms in the same industry, relevant industry or unrelated industries are located in the same region. Both urbanization and localization externality cause significant influences on a firm’s performance. Therefore our findings are consistent with the implications of MAR externality and Jacobs externality effect hypothesis. Furthermore, we estimate the agglomeration effects for each industry and find even more significant effects for some industries. The degree of agglomeration has a positive influence on the performance of firms in the precision technology, semiconductor, andcommunication industries. However, we find an opposite effect for the computer industry. The degree of agglomeration causes a negative influence on the performance of the computer industry. As for the effects of the urbanization externality and the localization externality, the localization externality exerts a more significant in.uence on the high-tech industries in Taiwan.