Firms’ Innovation Activity and Performance - Comparison between Manufacture and Service Industries in Taiwan

Along with the numerous innovation coming, an adequate assessment of a firm’s innovation activities is imperative. The purpose of this paper is to analyze firms’ innovation activity in Taiwan and make a comparison between manufacture and service industries. This study is based on the third Taiwan Technological Innovation Survey. The analysis applies a two-stage model for the empirical research, including SUR model and probit model. In this study, the first stage is to find out the determinants of firm’s innovative spending; the further stage discusses the performance of five innovative spending types: R & D activities within the company, commissioned research and development activities of other companies or institutions, making equipment and technology, obtaining external knowledge, and marketing innovation activities. Finally, the study compares the differences between manufacture and service firms. The main contribution of the paper is to assess firms’ innovation performance on the basis of the amounts of innovative spending. The empirical results show that: (1) Enterprise scale is an important determinant of innovative activity. (2)Older enterprises have more difficulty of innovation. (3) Government subsidies promote firms’ innovation activities. (4) Under the same condition, the manufactures’ spending is more than the services’. (5) The services’ innovation performance is better than the manufactures’. (6) Taiwan’s firms did not successfully accumulate their innovative power. According the paper, accumulating industrial strength is the solution for keeping the competitiveness of Taiwan’s enterprises.