Taiwan’seconomicdevelopmentpolicy wasto firstpromote an SME dominated industrial architecture and then encourage her industry toward a high tech focus.
Today,Taiwan’sinnovation record,asmeasured by herpatentscounts,hassurpassed those of France, England, Canada, Italy and Korea since 2001. In terms of
technology dissemination, public R&D - particularly through technology diffusion of ITRI’sS&T research projects- hasserved thefunction ofelevating theisland’s technological capability well, marking impressive milestones along the way in
patenting achievements.OuranalysiscreditsTaiwanesegovernment’seffortin thelast three decades to have successfully used public R&D resources to mitigate some of the constraints posed by the SME market structure. However, we find all G7 nations superiorly surpass Taiwan in patent quality. Taiwan has a larger number of patent awardsthan South Korea,butSouth Korea’spatentquality also appearsto besuperior than Taiwan.
We find that the dominance of the resource-poor SMEs in Taiwan contributed to the following characteristics of Taiwanese patenting: (1) high proportion of unassigned patents, suggesting that a significant portion of the acquired patents has little
commercial value; and (2) a stagnation problem exists as reflected by a low level of research persistence.
In terms of the policy implication of the findings, we first argue that when
measuring innovation, particularly innovation output, it is not enough to only look at the number of patents obtained or the number of new products or processes introduced in any given period or over time. While growth rates are an important indicator of momentum, a successful industrial policy must also ensure that a national system of
innovation not only is capable of creating opportunities to innovate but that system must also possess means to sustain a lively and continuous environment for
innovations. To the extent that current Taiwanese patenting inertia is due to her SME structure and if a competitive market structure is the desired form of market organization for Taiwan, then a new process that induces a high degree of product innovation within the confines of the current setting must be identified. How to unleash and mobilize the creative energy of the small private enterprises with limited resources should be an important public policy concern for Taiwan. Besides
emulating the U.S. experience to stimulate the incentives of public research
institutionsin patenting,redirecting aportion ofthestate’sresearch resourcesto the more competent private sector may be a policy shift worth consideration in order to maximizeTaiwan’spatenting and innovation potential.17
17After the changes in federal law such as the Bayh-Dole Act in the late 1980s, the American universities have had a significant increase in the rates of patenting and licensing
66
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Table 1 Technology Transfer Agreements:
Number of firms participated in ITRI projects in Taiwana
Channels of Transferb
Year Total
1991 4398 142 N/A 97 4159 N/A
1992 5512 301 N/A 178 5033 N/A
1993 5452 547 N/A 249 4656 N/A
1994 5222 366 N/A 423 4433 N/A
1995 5477 362 N/A 385 4730 N/A
1996 4846 372 N/A 412 4062 N/A
1997 3348 140 269 123 2454 362
1998 5506 156 309 111 4539 391
1999 2121 24 378 107 1320 292
2000 4678 12 300 109 4010 247
2001 3595 16 431 171 2618 359
Total 50155
aITRI denotes Industrial Technology Research Institute.
bThe first three channels are direct technology transfers among which firms share R&D costs partially with ITRI and participate in the very beginning of the S&T project in the collaborative research. With participation in early stage and subsequent projects firms only pay licensing fees/royalty to ITRI. As for follow-up and commercial investments, firms generally receive service support from the ITRI which may lead to commercial investment.
Source: http://doit.moea.gov.tw.
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Table 2
Comparison of patent counts and propensity to patent between the public sector and private enterprises (Taiwan)
Patent counts Propensity to patent Year public-owned
(1)
private-owned (2)
public sector (3)
private sector (4)
1980 0 (0)a 65 (100) 0.01 0.67
1985 3 (1.72) 171 (98.28) 0.01 0.82
1990 38 (5.19) 694 (94.81) 0.03 0.48
1995 186 (11.48) 1434 (88.52) 0.07 0.45
2000 294 (5.07) 5505 (94.93) 0.10 0.86
2001 339 (5.16) 6234 (94.84) 0.12 1.02
aThe numbers in the parentheses are patent shares. The sum of the shares in the columns (1) and (2) is equal to 100%.
Sources: NBER Patent Citation Database, USPTO website (www.uspto.gov) and NSC website (www.nsc.gov.tw).
Table 3 Patent awards and average growth rates
Patents granted per year Country
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Sources: NBER Patent Citation Database and USPTO website (www.uspto.gov)
aThe numbers in the parentheses are patent shares. The sum of the shares from columns (1) to (6) equals to 100%.
Table 4
Patent composition by category and share (in parentheses) for1985 and 2001
Country
Patents granted in 1985
12 7 4 22 39 90 174
Taiwan (7%)a (4%) (2%) (13%) (22%) (52%) (100%)
1909 1096 602 1573 2138 2136 9454
The
Patents granted in 2001
377 443 113 2478 899 1050 5360
Taiwan (7%) (8%) (2%) (46%) (17%) (20%) (100%)
2712 4700 2413 3247 2948 3398 19418
The average of G7
(14%) (24%) (12%) (17%) (15%) (18%) (100%)
429 1083 120 1291 413 271 3607
South
Korea (12%) (30%) (3%) (36%) (11%) (8%) (100%)
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5
1988 1990 1992 1994 1996 1998 2000 year
L og ( pa te nt nu m be rs )
Fig. 1A Number of patents in IT (Computers and Telecommunications)
USJP
GR FR UKCA
IT KR TW
74
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5
1988 1990 1992 1994 1996 1998 2000 year
L og ( pa te nt nu m be rs )
Fig. 1B Number of patents in IT (Electrical and Electronics)
USJP GR FR UK CA IT KR TW
Table 5 Comparison of patent quality by generality, originality, and claims
Country Biased-adjusted generalitya Biased-adjusted originalitya No. of claims per patent
1975-198 5
1986-199 6
1997-199 9
1975-198 5
1986-199 6
1997-199 9
1975-198 5
1986-199 6
1997-199 9
Taiwan 1.00 0.91 0.62 1.00 1.26 1.41 1.00 0.97 1.41
South Korea 1.04 0.98 0.77 0.93 1.44 1.59 1.03 1.52 1.79 G7
USA 1.15 1.13 0.96 1.52 1.78 1.93 1.83 2.40 2.84
Japan 1.06 1.04 0.87 1.48 1.63 1.70 1.49 1.80 2.26 Germany 1.09 1.04 0.83 1.44 1.63 1.74 1.69 1.97 2.19 France 1.11 1.06 0.79 1.44 1.67 1.74 1.63 1.94 2.34
UK 1.13 1.09 0.66 1.52 1.70 1.85 1.71 2.02 2.48
Canada 1.09 1.06 0.98 1.33 1.63 1.78 1.71 2.21 2.52 Italy 1.02 0.98 0.55 1.33 1.52 1.63 1.33 1.62 2.28
aBoth generality and originality are adjusted for the bias due to sample size.
Source: NBER Patent citation database
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Table 6
Comparison of patent quality by science linkage and new fields
Country Science linkagea Share of patents in new technology fields (%)b Taiwan
South Korea
0.24
0.79
19.64
21.46
G7
USA 4.48 14.04
Japan 1.06 14.08
Germany 1.53 5.16
France 1.93 5.52
UK 3.56 7.17
Canada 3.67 4.92
Italy 1.69 5.55
aSciencelinkageisdefined astheaveragenumberof“otherreferencescited”on front page of the patent in the USPTO database, including
academic journal articles and papers presented at scientific meetings.
bThe USPTO has created a number of new patent classes in response
to increasing patent application in relatively new technological areas since 1996.
Source: USPTO website (www.uspto.gov).
Table 7 : share of the number of SMEs in total manufacturing: Taiwan v.s. South Korea
Percent of firms,1999 Concentration ratio in sales, 2003
Taiwan S. Korea Taiwan S. Korea
SMEs 97.3 98.6
Large firms 2.7 1.4
Big 4 groups 21.29 42.50
Total manufacturing sector 100 100
GDP in 2003 100 100
Sources :
(1) National Statistical Office, Report on Mining and Manufacturing Survey, South Korea;
(2)http://www.moeasmea.gov.tw;
(3)”Big4 ChaeboldriveKorean Economy”,KoreaTimes,May 14,2004;
(4)“Fifty businessgroupsin Taiwan”,JournalofTeng Sha(in Chinese),July 2004.
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Table 8 Statistics on patent assignees: Taiwan vs South Korea
% of unassigned patents
Year Taiwan South Korea
1975 73.91 69.23
1980 93.85 87.50
1985 91.95 58.54
1990 84.43 25.78
1995 62.41 9.39
2000 40.90 5.85
2001 38.35 6.90
Sources: NBER Patent Citation Database and USPTO website (www.uspto.gov).
Table 9
Regression of patent quality on assigned patents
Dependent variable CRECEIVE CLAIMS
CONSTANT 4.89** (0.15) 4.77** (0.26) ASSIGNED 0.42** (0.07) 3.90** (0.11) COUNTRY 0.48** (0.06) -0.21** (0.08) CHEM -0.84** (0.12) 1.50** (0.16)
COM. 0.63** (0.09) 3.05** (0.13)
DRUG 0.19 (0.19) 0.94** (0.25)
ELEC 0.69** (0.08) 2.95** (0.11)
MECH -0.24** (0.08) 0.04 (0.13)
T86-95 -1.02** (0.14) -1.11** (0.26)
T96-01 -4.03** (0.15) 0.98** (0.26)
R2 0.11 0.16
No. of observations 21279 40687
Standard errors in parentheses.
Statistical significance at the 0.05 level is denoted by **.
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Table 10 Patent performance of top three assignees, 1997-2001
Assignee Global rank No. of patent
Taiwan
1. United Microelectronics Co. 40 1603 2. Taiwan Semiconductor Manufacturing Co., Ltd. 41 1552 3. Hon Hai Precision Ind. Co., Ltd. 66 1003
Total 4158
South Korea
1. Samsung Electronics Co., Ltd. 5 6325 2. Hyundai Electronics Industries Co., Ltd. 45 1435
3. LG Electronics Inc. 64 1025
Total 8785
Sources: NBER Patent Citation Database and USPTO website (www.uspto.gov)
Table 11
Distribution of patenting spell lengths, 1975-2001: Taiwan vs Korea Taiwan South Korea Duration (year) No. of spell. Percent No. of spell Percent
1 1,483 79.65 607 76.07
2 198 10.63 103 12.91
3 88 4.73 24 3.01
4 44 2.36 16 2.01
5 17 0.91 11 1.38
6 5 0.27 7 0.88
7 9 0.48 7 0.88
8 5 0.27 7 0.88
9 5 0.27 4 0.50
10 3 0.16 3 0.38
11 3 0.16 2 0.25
12 -- -- 4 0.50
13 1 0.05 --
--14 -- -- 1 0.13
16 -- -- 1 0.13
17 -- -- 1 0.13
21 1 0.05 --
--Total 1,862 100.00 798 100.00
Sources: NBER Patent Citation Database and USPTO website (www.uspto.gov).
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Table 12
Entry and exit rate
Country Taiwan South Korea
Period 1976~1985 1986~1996 1997~2001 1976~1985 1986~1996 1997~2001
Entry rate 0.81 1.06 0.88 0.88 0.81 0.80
Entrant patent share 0.08 0.10 0.19 0.24 0.14 0.08
Entrant’saverage patent counts relative to incumbents
0.04 0.03 0.15 0.15 0.08 0.05
Exit rate 0.57 0.60 0.45 0.66 0.46 0.42
Exiter patent share 0.08 0.09 0.20 0.26 0.10 0.05
Exiter’saveragepatent counts relative to incumbents
0.06 0.04 0.20 0.28 0.12 0.06
Sources: The 1975-1999 data are from NBER Patent Citation Database and the 2000-2001data are from USPTO website (www.uspto.gov).