Institutional support, innovation capabilities and exports: Evidence from the semiconductor industry in Taiwan

This paper examines the relationship between host-site institutional support, innovation capabilities and exports using data from a survey of 50 Taiwan semiconductor firms. The major questions asked in the paper are whether host-site institutional support is important in stimulating firm-level innovation capability, and whether the latter is important in firms' exports. An evolutionary perspective was used to measure innovation capabilities using knowledge embodied in machinery, training, processes and products. The statistical results show that innovation capability is correlated with institutional support. In addition, the findings also indicate that innovation capabilities (IC) enjoy a positive relationship with exports. The control variable of size had a positive effect in innovation capabilities and in exports, while human capital was critical in exports. The supply of R&D grants, R&D engineers and scientists, and support from universities and R&D labs has been viewed by firms as important in supporting innovation capability and semiconductor exports.