Doing R&D and Importing Technology: an Empirical Investigation on Taiwan’s manufacturing firms Chia-Lin CHANG a Stéphane ROBIN b Abstract: The objective of this paper is to identify the determinants of the decision to innovate in Taiwan. Three “innovation strategies” are considered: doing R&D only, importing technology only, and combining both. We estimate a Bivariate Probit on a panel of more than 27000 Taiwanese manufacturing firms observed from 1992 to 1995. Results suggest that the decision to do R&D over the period was influenced by the prior changes in exportations at the industry level, whereas the decision to import technology is affected by the current changes. We identify a non-linear relationship between firm size and innovation. Moreover, older firms tend to innovate less, whereas market structure doesn’t affect the decision to innovate. These two results change when only high-tech industries are considered: the effect of firms’ age becomes insignificant, whereas a more concentrated market structure is shown to increase the probability to innovate. Keywords: R&D, importation of technology, market structure, technological opportunities, high-tech industries, panel data, bivariate Probit. JEL Codes: L10, L20, O31, O33 The authors would like to thank the following persons for helpful comments and advice on a previous version of this research: Ai-Ting Goh, Philippe Monfort, Vincent Vannetelbosch, Reinhilde Veugelers, and Hideki Yamawaki. This research is part of a programme supported by the Belgian government (Poles d'Attraction inter-universitaires PAI P5/21) . We are grateful for the financial support from the Belgian French Community's program 'Action de Recherches Concertée' 99/04-235. a IRES-UCL (Belgium), chang@ires.ucl.ac.be b CRESGE-LABORES (France), srobin@cresge.fr , and IRES-UCL (Belgium), robin@ires.ucl.ac.be