Microsoft word - newsletter-v.11,no5.doc
March 2005 Vol. 11 No. 5
The Development of Industrial Clusters Towards a
The aims of this study are to: (i) explore the factors contributing to the
successful formation of industrial clusters and the overall effects of industrialclustering on productivity; (ii) gain an understanding of the organization andnetworking of industrial clusters; (iii) examine the flow of human resources betweenclusters in Chinese Taipei, the U.S., and China, focusing on the drivers of the ‘braincirculation’, along with its contribution to technological innovation; and (iv) highlightthe interrelationships that exist between industrial clustering and innovation.
In part (i), drawing on empirical evidence from the Hsinchu Science-based
Industrial Park (HSIP), we find that outsourcing is generally adopted by firms withinthe clusters since this enables them to access the major markets and to save on R&Dcosts through production specialization. The experiences of HSIP also support theassertion that entrepreneurship, skilled labor, and market access are essentialingredients for the formation of a cluster. In order to determine whether commonmechanisms exist to bring together these three ingredients and produce a winningformula, we have attempted to compare the experiences of HSIP to those of SiliconValley in the U.S., as well as the experiences of the industrial clusters in Penang andthe Kelang Valley in Malaysia, Hamamatsu in Japan, and Shanghai in China.
Our studies also show that industrial clustering improves the productivity of
individual firms, in part (i). We have been able to gather evidence with statisticalrobustness to support the role played by the Porter externality and Marshall-Romer inindustrial clusters. Although these two externalities differ in nature, they can existsimultaneously in a cluster. If firms in a cluster are more productive than those
outside the cluster, then it naturally follows that firms that locate too distant from thecluster will be driven out of the industry by competition. This, of course, is the maindriving force for agglomeration.
In parts (ii) and (iii) we look at the technological linkages between clusters from
the viewpoint of networking. Firms can learn from other firms through globalproduction networks within which they operate, collaborating to offer products in theglobal market, and it is clear that a cluster is an important facilitator for such learning.
Clusters form a ‘learning region’ within which knowledge flows and is diffused,amongst the firms residing there. Clusters also provide a bridge between differentlearning regions to facilitate the effective transfer of knowledge. We conduct aninvestigation into the state of human resource development within the HSIP, fromwhich we find that industrial output expanded exponentially between 1990 and 1995,along with the infusion of high-skilled labor from overseas. Furthermore, there hasbeen a slowdown in the rate of the so-called ‘reverse brain drain’ since 1995, withforeign workers now accounting for a substantial proportion of labor movement. Thissuggests that the HSIP is becoming increasingly integrated with the global market,because high-skilled labor within the park has increasingly shifted away fromproduction toward research and development.
We also make an inquiry into the intra-cluster division of labor and networking
relationships, using the HSIP as an example, and find that the most prevalent modesof interaction between firms in the HSIP are subcontracting and outsourcing ofcomponents and parts. This implies a vertical disintegration of production within theHSIP, and that the duration of subcontracting contracts increases positively with thedistance between the partners Moreover, the potential impacts of industrial clusteringon entrepreneurship have been examined and the results reveal some positivecorrelations. Industries that are more geographically concentrated are found to bemore receptive to new entrants, implying that industrial clustering may help facilitatelabor pooling since industrial clustering reduces the costs of hiring and dischargingworkers. The empirical research is in line with the theoretical expectation, indicatingthat successful industrial clusters are important to the incubation of entrepreneurship.
In part (iv) we suggest that industrial clustering occurs not only in high-tech
industries, but also in the so-called traditional industries. It appears that innovationand growth are the two most important elements in the formation of an industrialcluster. Innovation provides the dynamics for competition and restructuring.
Innovation also underlines the benefits of knowledge sharing, which is the basicreason for firms to co-locate with one another. At the same time, growth is importantboth in terms of inducing new entry and facilitating a division of labor within the
industry. Growth in most cases is demand-driven and therefore the link (or access) tothe major markets is the key to the formation of an industrial cluster.
Finally, the whole research report finishes with conclusions and policy
recommendations. In terms of policy recommendations, we suggest that industrialclustering can be a useful policy for national economic development on various scales.
However, there is no one-size-fit-all formula for successful industrial clustering andan economy should allow its comparative advantage to determine what industriesshould grow into a cluster. Having said that, investment infrastructures and humanresources, building innovation capabilities, linking sources of growth, promotingvertical disintegration and subcontracting, and enhancing productivity can be the keyingredients of industrial cluster policies.(project no.707)
The Economic Meaning of the “Taiwan Technological Innovation Survey” andSome Crucial Factors for Innovations, Jiann-Chyuan Wang g, July 2004. (project no.695)
There are three purposes of this project. First, questionnaires of the “Taiwan
Technological Innovation Survey” are analyzed with respect to different industriesand scales of enterprises in order to offer policy suggestions for the adjustment ofgovernment development policies and public resources allocations.
Second, by reviewing the investigations of advanced countries, we have learned
of some of the difficulties in innovations faced by industries, and have then proposedsome possible means of innovations in the manufacturing and service sectors.
Finally, we suggest some improvements to the “Taiwan Technological
Innovation Survey” for further economic analysis and international comparisons.
An Exploration on the Future Operation Model (FORM) of the TaiPowerResearch Institute (TPRI), Li-Ping Alfred Cheng , September 2004. (project no.690)
The TaiPower Research Institute (TPRI) has long played an important role on
supporting the planning and development for the TaiPower Company (TPC) inTaiwan since its establishment. Nowadays, TPC is confronting serious environmentalchange, including the country’s accession into WTO, and the eagerness forprivatization as invoked by people as well as the government. Drastic and potentialcompetition pressure may come from private firms as well as foreign companies. Atthis moment, as the leading think tank of the TPC, TPRI must take the lead to make achange by restructuring, reinventing, and virtualizing itself as soon as possible inorder to make it more efficient and competitive to comply with the foresight of theworld.
This project team is articulated to study how, where, and why the TPRI can
arrive at in the near future. In searching for excellence, the TPRI is dedicated to re-integrating the current organization into a functionally and virtually operative one soas to enhance its potentials through five virtually-designed working centers: namely,the information center, the technical service center, the testing service center, theincubation center, and the business and profit center. Researching on all of thesepossibilities, this project’s design is to utilize a foresight and scenario analysis tobenchmark domestic and foreign companies on their excellence and key successfactors in order to generate TPRI’s new profit pattern.
Combining with some theories and practices of organizational change, portfolio
investment, incubation, networking capability, performance evaluation, as well asincentive mechanism design, this research project emphasizes on three dimensions ofanalysis. From the viewpoint of the foresight management, the performance of ERP,the process flow automation, and the cooperative and competitive activities are thefocus. From organizational change, the integration of virtual and physical activities isthe focus. On financial profitability and based on the great technology potentials ofthe TPC, the focus is on opportunities for new investments, new incubating targets,and new services that may be the most important for either spin-offs or internalestablishment of new business areas.
This research is expected to explore the relevant and possible operational models
for the transformation of the TPRI before and after the implementation of theprivatization policy. A certain level of diversification upon the TPC is highlyexpected, given the expected research results of the project. Based on the research, itis confirmed that this project may highlight a vision and a road map for transformingTPRI into a global and first-class think tank in the near future, given the possibility ofrevealing its potential after privatization. The resulting report also suggests thetransformation direction and profit patterns for the entire TPC into its future.
The main conclusion is subject to the fulfillment of the following conditions:
The functionality of transforming informational asymmetry from the now-givenstructure of the organization to a laterally and virtually-integrated informationstructure inside the organization.
The functionality for transforming an internal client-server mode of structure into
a market-oriented, internal/external demand and supply structure of dual servicecondition.
The functionality for transforming the attitude based on order-taking services
into the mode of competitive ordering for the niche market.
The functional transformation from the current organization-oriented style into
market-oriented, regional operations-oriented, and even global markets-orientedmodes of operations with flexible and virtual capability.
The functionality for transforming organizational knowledge into intellectual
resources so as to direct itself into a learning and sustainable organization.
This research highlights the value proposition for the TPRI from its roots as a
Lab and the capacity of research and development. Basically, with the concept of aLab platform, the five virtual-operation centers play well designed functions for thetransformation of the TPRI. To realize this potentiality, more promised resourcesfrom the parent company and a deregulation of some regulatory controls are requiredto sufficiently achieve the end goal.
A Study on Science and Technology Policy :Human Resource Utilization andEffective Budget Allocation, Jiann-Chyuan Wang , October 2004. (project no.694)
In order to realize the objective of The Sixth National Technology Conference,
we continue the task of part one of this project and evaluate the achievements of thecorresponding responsible government agencies which have implemented strategiesone and two. Aside from the above objective, there are three more purposes of thisproject: first, to investigate the effects of innovations on industries’ competitiveness;second, to analyze the effects of government R&D expenditure on that of the privatesector - substitution or complementary effects; third, to study the strategy ofstrengthening the cooperation between industry and universities.
Agricultural Transformation in Taiwan under Globalization:The Strategy andApproach to Guiding theIndustrialization of Agriculture, Chang-Jen Chen,
In order to facilitate the industrialization of Taiwan’s agriculture, this research
will first introduce the environment of agricultural development and then divide theagricultural proprietors into three groups: traditional farmers, farmers’ associations,and agribusiness. The study then presents the problems faced by these groups and thepolicy and mechanisms of Taiwan’s agricultural authority. Secondly, this researchextensively gathers the related policies and mechanisms of foreign agriculturalauthorities and private entities. After analyzing the problems of the three groups andthe foreign experience, this research next takes into consideration the opinions of theproprietors and finally give some suggestions about the strategy and approaches toguiding the industrialization of agriculture in Taiwan. The suggestions include:
This research suggests that individual farmers may increase the scale of their
businesses through a horizontal combination with each other, or through a verticalcombination with upstream or downstream proprietors.
This research suggests the agricultural authority to finalize the laws dealing with
farmers’ association, to encourage local associations to combine with one other, andto enhance the business and the human resources of the farmers’ associations.
This research suggests the agricultural authority to encourage the establishment
of local professional agribusinesses, to promote the products of these agribusinesseswhich are of acceptable standards, and to provide loans at low interest rates.
The Impact of EU Enlargement on Taiwan’s Trade and Investment in Europe,
Ying-Hwa Ku, December 2004. (project no.735)
The enlargement of the EU will cause significant changes in the European
political and economic arena. In terms of population or economic scale, the EU hasbecome one of the most important regional groupings in the world. With improvedmarket access for ten Central and Eastern European countries, the productionstructures will be remodeled in the new as well as incumbent states. As foreign directinvestment (FDI) increases in the new member states, the economic growth rates inthese countries will increase and the competitiveness of their industries will improve,putting pressure on their competitors in international trade, such as Taiwan.
The purpose of this project is to inquire into the possible impacts of EU
enlargement on Taiwan and the suitable responses that Taiwan can make. We findthat, in terms of trade, the new members of the EU present a challenge to Taiwan’sexports of telecommunications equipment, electrical machinery, and electronics parts,among others. However, the new members themselves also present new marketopportunities for Taiwanese products. In terms of FDI, the advantage of lowerproduction costs in the ten new member states will attract foreign capital, includingthat from Taiwan. This offers Taiwanese firms a springboard to Western EU markets,which they have previously served from their Asian production bases. The increasingcongregation of manufacturing industries in newly-affiliated member states makes theproduction in Eastern EU even more competitive. We recommend that Taiwanesefirms take a closer look at investment and trading opportunities in the new memberstates and to think harder about localizing some production in Europe in order toimprove their competitiveness at the beginning of this new globalization era
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