Industrial Diversification and Its Impact on Productivity Growth in Taiwan’s Electronics Industry*

The present study attempts to link plant-level production diversification to productivity growth in Taiwan’s electronics industry. An account of the role of the Taiwanese government over the last 2 decades leading to the take-off of its electronics industry is briefly discussed. We reviewed production activities of more than 20 000 Taiwanese electronics plants during the period 1992–1999. In an inter-industry comparison, we find that at the four-digit and seven-digit industry levels, Taiwanese electronics production plants exhibit a significantly higher degree of product diversification than plants in the manufacturing sector as a whole. Econometric results positively identify diversification as a source of significant productivity growth across all electronics plants classified in the related industry groups.