Firm Clustering and Specialization: A Study of Taiwan’s Machine Tool Industry

Abstract

Taiwan, machine tools, industrial districts, firm specialization, vertical integration, product scope, D20, L11, L22, L23, L26, O30, R30,

Geographical Agglomeration as an Alternative to Vertical Integration

“…We can observe that agglomeration is negatively and significantly correlated with the degree of vertical integration, but only for the zip code. We also found a significant relationship between agglomeration and horizontal specialization, as Brookfield (2008) suggests.…”

“…Storper and Christopherson (1987) described how the process of vertical disintegration that characterized the US motion-picture industry from the 1950s to the early 1980s led to significant changes in industrial location patterns, creating strong agglomeration tendencies. Later, Scott and Kwok (1988) and Brookfield (2008) tested and corroborated that vertical specialization was significantly associated with higher levels of spatial agglomeration in the printed-circuits industry of Southern California and the Taiwanese machine-tool industry, respectively. In a similar vein, Holmes (1999) confirmed that establishments that are located in areas where an industry was more concentrated were more likely to contract out than were those located in areas where industries were less concentrated, but he also found that this relationship varied across industries with different characteristics.…”

“…Unlike other industries that have been previously studied-e.g., motion pictures (Storper and Christopherson 1987), printed circuit cards (Scott and Kwok 1988), and machine tools (Brookfield 2008)-the meat industry is non-knowledge-intensive. As Iammarion and McCann (2006) point out, the advantages of participating in a cluster directly depend on the knowledge flows among firms.…”

“…Analyzing firm boundaries involves addressing the decisions of both vertical integration and horizontal scope-that is, the extent to which that establishment is present in multiple products or markets (Brookfield 2008). Although reasons that induce firms to expand or narrow their horizontal scope are quite different from those related to vertical integration, there may be some mutual influence between them.…”

Agglomeration, Related Variety, and Vertical Integration

“…They have highlighted the relationship between the geographic concentration of production and vertical integration (Cainelli and Iacobucci 2009;Holmes 1999;Helsley and Strange 2007;Brookfield 2008;Diez-Vial and Alvarez-Suescun 2010). They have highlighted the relationship between the geographic concentration of production and vertical integration (Cainelli and Iacobucci 2009;Holmes 1999;Helsley and Strange 2007;Brookfield 2008;Diez-Vial and Alvarez-Suescun 2010).…”