This paper is to assess the dynamic characteristics of industry clustering, and to tackle the implications of Taiwan geographic concentration. We examine different hypotheses of industrial clustering by three leading theories of industrial clustering: the “Knowledge Spillovers Theory”
(KST), the “Dynamic Location Choice” (DLC) model, and the “Transaction Cost Economics”
(TCE) approach. We extend DLC model to incorporate KST and TCE perspectives and derive a number of hypotheses that are testable with plant-level dataset of Taiwan manufacturing industries.
And we explore comparative advantages and different specific characteristics in each region that draws different types of industries to locate.
The overall Taiwan manufacturing industries is highly concentrated and the geographical concentration is at a higher level compared to other manufacturing industries, e.g. US manufacturing industry and France manufacturing industry. In examining the North, Midland, and South region of Taiwan individually, we capture the specific characteristics of each region.
We conclude that the South is more concentrated with some manufacturing industries than the other regions. And Taipei County is the most popularly concentrated area for the major manufacturing industries in the North.
According to Williamson (1965), unbalance development level across the areas would raise with economic growth at initial time of economic development that is called backwash effect.
This effect widens regional difference by appealing to the labors and capital from backward areas to prosperous areas. While the economic development achieves a mature stage, the unequal situation would be eased with the spread effect for the economic activity of the growing area reach saturation and diffuses to other areas little by little. Compared to our empirical analysis which reveals the geographic concentration degree is high but decreasing, we might claim that Taiwan get into the mature period of economic development with stronger spread effect. From our empirical results, the outsourcing proportion level captured part of transaction costs has the greatest impact to industrial agglomeration. The effect of raw material usage doesn’t have significant influence to industrial agglomeration.
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Table 1 Statistical Analysis of Geographic Concentration Indicators
Variable Obs. Mean Std. Dev. Min Max
GI 95 0.393458 0.132859 0.16465 0.800607
G 95 0.100927 0.097086 0.011613 0.462417
H 95 0.028973 0.051445 0.0004 0.406
γ 95 0.087236 0.098088 0.001425 0.509151
Figure 1 The Histograms of Geographic Indicators
0246810# of industries
.2 .4 .6 .8
GI
01020304050# of industries
0 .1 .2 .3 .4
H
0510# of industries
0 .1 .2 .3 .4 .5
G
051015# of industries
0 .1 .2 .3 .4 .5
r
Table 2 Most and Least Localized Industries
SIC γ H G area
10 Most Localized Industries 163 Printed Matters Bookbinding and Processing 0.5092 0.0191 0.4624 01
113 Textile Hat Manufacturing 0.433 0.0492 0.411 06
257 Pollution Controlling Equipment Manufacturing and
Repairing 0.3711 0.0138 0.3387 01
291 Ship and Parts Manufacturing and Repairing 0.3517 0.0944 0.3682 64 255 Building and Mining Machinery Manufacturing and
Repairing 0.3189 0.0364 0.3065 01
273 Bare Printed Circuit Boards Manufacturing 0.3042 0.0135 0.2797 03 252 Agricultural and Horticulture Machinery
Manufacturing and Repairing 0.2829 0.0178 0.2636 01
191 Petroleum Refineries 0.245 0.1992 0.3526 64
295 Bicycles and Parts Manufacturing 0.2395 0.0104 0.2207 06
161 Plate making 0.2352 0.0167 0.2211 01
258 General Machinery Manufacturing and Repairing 0.1826 0.0045 0.1661 01 10 Least Localized Industries 244 Metal Container Manufacturing 0.0014 0.0405 0.0373 183 Cleaning Preparations Manufacturing 0.0016 0.0211 0.0202 159 Other Paper Products Manufacturing 0.0025 0.014 0.0147 179 Other Chemical Materials Manufacturing 0.0026 0.0187 0.0189
089 Other Food Manufacturing 0.0048 0.0083 0.0116
081 Slaughtering 0.0057 0.1268 0.1175
189 Other Chemical Products Manufacturing 0.0094 0.0054 0.0132
087 Seasoning Manufacturing 0.0096 0.0481 0.0511
282 Electrical Appliances and Housewares Manufacturing 0.0096 0.0251 0.0307 319 Other Industrial Products Manufacturing 0.011 0.0049 0.0141
Table 3 Statistical Analyses of Geographic Concentration Indicators by Region
Variable Obs. Mean Std. Dev. Min Max
H 95 0.028973 0.051445 0.0004 0.406
Γ 95 0.087236 0.098088 0.001425 0.509151
Hn 95 0.095094 0.15468 1.14E-05 0.865885
γn 95 0.090888 0.252195 -0.57327 0.732077
Hm 95 0.080542 0.105757 0.000276 0.527041
γm 95 0.131888 0.227658 -0.47907 0.965074
Hs 95 0.102288 0.150795 5.17E-08 1
γs 95 0.106648 0.1727 -0.29011 0.789474
Table 4 The Top 10 Most Localized Industries of North, Midland, and South Taiwan
SIC γ H Si
10 Most Localized Industries of the
North
292 Tramway Cars and Parts Manufacturing and Repairing 0.7321 0.8659 63 291 Ship and Parts Manufacturing and Repairing 0.6831 0.1811 17 252 Agricultural and Horticulture Machinery Manufacturing and
Repairing 0.6407 0.0015 01
255 Building and Mining Machinery Manufacturing and Repairing 0.6207 0.0029 01 296 Aircraft and Parts Manufacturing and Repairing 0.5717 0.5294 03 257 Pollution Controlling Equipment Manufacturing and Repairing 0.5232 0.0009 01
200 Rubber Products Manufacturing 0.3840 0.0043 01
271 Semi-conductors Manufacturing 0.3738 0.0394 04
163 Printed Matters Bookbinding and Processing 0.3684 0.4990 01 245 Metal Surface Treating and Heat Treating 0.3619 0.0964 01 10 Most Localized
Industries of the Middle Taiwan 171 Basic Chemical Material Manufacturing 0.9651 0.1891 06 163 Printed Matters Bookbinding and Processing 0.8182 0.0467 19 264 Data Storage Media Units Manufacturing and Reproducing 0.7968 0.0003 19
086 Sugar Manufacturing 0.6269 0.2684 09
273 Bare Printed Circuit Boards Manufacturing 0.6230 0.0221 06
284 Batteries Manufacturing 0.5101 0.0117 07
114 Clothing Accessories Manufacturing 0.5074 0.0162 07
081 Slaughtering 0.4857 0.3872 09
296 Aircraft and Parts Manufacturing and Repairing 0.4279 0.5270 19
101 Yarn Spinning Mills 0.4263 0.0182 07
10 Most Localized Industries of the
South
271 Semi-conductors Manufacturing 0.7895 0.0424 64
191 Petroleum Refineries 0.7427 0.3935 64
105 Printing, Dyeing and Finishing Mills 0.5309 0.0618 11 241 Metal Forging and Powder Metallurgy 0.4560 0.1194 12
081 Slaughtering 0.4378 0.3943 13
102 Fabric Mills 0.4083 0.0406 11
291 Ship and Parts Manufacturing and Repairing 0.4035 0.1478 64 292 Tramway Cars and Parts Manufacturing and Repairing 0.3551 0.8044 12 171 Basic Chemical Material Manufacturing 0.3494 0.0000 12
109 Other Textile Mills 0.3404 0.0202 11