Chang, Chia-LinOxley, L.2009-02-102009-02-102008Chang, Chia-Lin, Oxley, L. (2008) Industrial Agglomeration, Geographic Innovation and Total Factor Productivity: The Case of Taiwan. University of Canterbury. 30pp..http://hdl.handle.net/10092/2082RePEc Working Paper Series: No. 14/2008The paper analyses the impact of geographic innovation on Total Factor Productivity (TFP) in Taiwan. Using 242 four-digit standard industrial classification (SIC) industries in Taiwan in 2001, we compute TFP by estimating Translog production functions with K, L, E and M inputs, and measure the geographic innovative activity using both Krugman's Gini coefficients and the location Herfindahl index. We also consider the geographic innovation variable as an endogenous variable and use 2SLS to obtain a consistent, albeit inefficient, estimator. The empirical results show a significantly positive effect of geographic innovation, as well as R&D expenditure, on TFP. These results are robust for the Gini coefficients and location Herfindahl index, when industry characteristics and heteroskedasticity are controlled. Moreover, according to the endogeneity of geographic innovation, the Hausman test shows that the geographic innovation variable should be treated as endogenous, which supports the modern theory of industrial clustering about innovation spillovers within clusters.enindustry agglomerationgeographic innovationtotal factor productivityclusterresearch and developmentDiscussion / Working PapersFields of Research::340000 Economics::340200 Applied Economics::340205 Industry economics and industrial organisationFields of Research::340000 Economics::340200 Applied Economics::340212 Economic geography