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INNOVATION CHARACTERISTICS, INDUSTRIAL CLUSTERS, AND INTRA-INDUSTRY SPILLOVER EFFECTS IN INTEGRATED CIRCUIT INDUSTRY

BI-HUEI TSAI

Department of Management Science, National Chiao Tung University, 1001 Ta-Hsueh Road, Hsinchu 300, Taiwan

Corresponding author.

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HUANG WEN CHEN

Department of Management Science, National Chiao Tung University, 1001 Ta-Hsueh Road, Hsinchu 300, Taiwan

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https://doi.org/10.1142/S021987701350020XCited by:0 (Source: Crossref)

Abstract

Since Taiwan and U.S. integrated circuit (IC) industries cluster in Hsinchu Science Industrial Park (HSIP) and Silicon Valley, respectively, these IC firms can easily imitate any innovation through the interactions among intra-industry firms. The contribution of intra-industry innovation development to firms' technological advancement is defined as the "spillover effect". This paper compares how the innovation characteristics and industrial clustering influence the spillover effects. The results show the research and development (R&D) spillover effects in IC manufacturing, packaging and testing industries appear evidently greater than those in IC design industry, while the patent spillover effect exhibits greater for IC design industry than for the other IC industries. Similar production stages in IC manufacturing, packaging and testing industries enable firms to easily imitate R&D outcomes within the same industry. By contrast, the production process of IC design firms is diversified, so they hardly upgrade their technical skills through the interchange of R&D information within the same industry. Hence, the IC design firms, which focus on product innovation, rely more on patent licensing to develop core technology innovation. Finally, R&D spillover effect is evidently greater in U.S. IC design industry than in Taiwan IC design industry, while patent spillover effect appears greater in Taiwan IC design industry than in U.S. IC design industry. The IC design industry in U.S. free-rides intra-industry R&D outcomes more easily than that in Taiwan. Consequently, Taiwan IC design firms rely on patent spillovers to develop IC elements, which are compatible with the incumbent IC products.

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