The Division of Labor and the Formation of Industrial Clusters in Taiwan

While the role of clusters in promoting industrial development has been increasingly recognized in the literature, the locational choice of industrial clusters and the underlying factors affecting such a choice have seldom been analyzed, particularly in the context of industrial development in developing countries. In this article, the authors hypothesize that industrial clusters tend to be formed in suburban areas, where the division of labor among enterprises producing diverse products is intense. They obtained supportive evidence through regression analyses of changes in employment and value‐added ratio using township‐level census data of selected industries in Taiwan from 1976 to 1996.