Show-Long Jang a and Simona Sung b a Department od Economics, National Taiwan University, No.21, Hsu-Chow Road, Taipei, 100 Taiwan b School of Business, The College of Saint Rose, Albany, NY 12203, USA Taiwan’s patent performance and the impact of industry structure

OUTLINE 1.Introduction 2.Structure of Taiwanese industry 3.International comparison of Taiwanese patenting 4.The effect of industry structure on patenting: a comparison between Taiwan and South Korea 5.Summary and conclusions

1. Introduction This paper takes a look at Taiwan’s innovation path and compares her innovation performance to the technology frontier of the world. We also look at the effect of Taiwanese industrial policy and the impact of the resulting market structure on Taiwanese innovation.

2.Structure of Taiwanese industry

2.1 SMEs Taiwanese economy developed within an industrial framework where small and medium-sized enterprises made up more than 95% of total number of firms for decades.

2.2 Role of government in innovation In the early 1970s, in an effort to emulate California’s Silicon Valley, the government established two institutions in Hsinchu, Taiwan: The Industrial Technology Research Institute (ITRI) and the Hsinchu Science-Based Industry Park together with two existing nearby S&T heavy universities ITRI is the primary driving force in Taiwan for the leveraging of advanced technologies from abroad, and for their timely dissemination to local firms. Public R&D in Taiwan has served the function of elevating the technological capability of the private sector relatively successfully, but its own research productivity has not matched the patent records achieved by the private sector.

Table 1 Technology Transfer Agreements:Number of firms participated in ITRI projects in Taiwan a

Table 2 Comparison of patent counts and propensity to patent between the public sector and private enterprises (Taiwan)

3.International Comparison of Taiwan Patenting

3.1 Patent count The comparison of patent data with G7 nations should allow us to assess the strength and weaknesses of Taiwan’s technology capacity relative to the world’s leading technologically developed nations. The inclusion of South Korea follows from her similarity to Taiwan in terms of culture, per capita GDP, export-heavy development design, and the rapid transcend from a technology latecomer to a technology generator.

Table 3 Patent awards and average growth rates

Table 4 Patent composition by category and share (in parentheses) for 1985 and 2001

3.2 Patent quality We examine the patents’ quality by: generality originality number of claims science linkage new fields

Table 5 Comparison of patent quality by generality, originality, and claims

Table 6 Comparison of patent quality by science linkage and new fields

4. The effect of industry structure on patenting: a comparison between Taiwan and Korea

By the 1990s, two very different forms of market organization have taken shape in Taiwan and South Korea. While the proportion of SMEs in total manufacturing (in terms of number of firms) was similar, the concentration of market shares is significantly different between the two economies.

Table 7 : share of the number of SMEs in total manufacturing: Taiwan v.s. South Korea

The clear contrast in market structure between Taiwan and South Korea has produced very different innovation outcomes. Two problems stand out sharply for Taiwan currently: the proportion of Taiwan’s unassigned patents is too high, and a stagnation problem now exists, inhibiting the persistence of innovative research and development in Taiwan.

Table 8 Statistics on patent assignees: Taiwan vs South Korea Table 8 Statistics on patent assignees: Taiwan vs South Korea

Table 9 Regression of patent quality on assigned patents

Table 10 Patent performance of top three assignees,

Table 11 Distribution of patenting spell lengths, : Taiwan vs Korea Table 11 Distribution of patenting spell lengths, : Taiwan vs Korea

Table 12 Entry and exit rate

5. Summary & Conclusions

1.Our analysis credits Taiwanese government’s effort in the last three decades to have successfully used public R&D resources to mitigate some of the constraints posed by the SME market structure 2.However, we find all G7 nations superiorly surpass Taiwan in patent quality. 3.Taiwan has a larger number of patent awards than South Korea, but South Korea’s patent quality also appears to be superior than Taiwan.

4.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. 5.Emulating the U.S. experience to stimulate the incentives of public research institutions in patenting, redirecting a portion of the state’s research resources to the more competent private sector may be a policy shift worth consideration in order to maximize Taiwan’s patenting and innovation potential.

Thank you for your listening

Q&A