Abstract
This thesis aims to investigate the effect of trade liberalization on firm innovation. We measure the performance of innovation by the number of patent applications at the enterprise level. The empirical analysis uses the firm-level data from Taiwan’s electronics industry from 1990 to 2015 combined with the patent data. Due to the problem of overdispersion and zero-inflation, we adopt zero-inflated negative binomial model in the empirical analysis. The results show that exports and accession to WTO have a positive impact on the number of patent applications. Although we can not specify which mechanism have dominant influence, our findings suggest that trade liberalization promotes innovation in Taiwan’s electronics industry.