# A Statistical Analysis of Industrial Penetration and Internet Intensity in Taiwan +
## 4 Data and Variables  
In order to capture the use of the internet by manufacturers from a geographical dimension, we use unique census data for Taiwan's manufacturing firms obtained from the Directorate-General of Budget, Accounting and Statistics (DGBAS) for 2006. The sample comprises a total of 153,081 manufacturers that can be decomposed into 26 items (at the 2-digit SIC level) and 212 items at the (at the 4-digit SIC level) (SIC denotes Standard Industrial Classification). The scope of coverage includes Taiwan (Republic of China) and the Penghu archipelago, with there being a total of 358 urban and rural areas. The 26 industries associated with the 2-digit code and numbers of firms are given in Table 1.  
As there are different ways of calculating industrial concentration in the literature, we use two of the more common indices to measure the degree of industrial concentration, namely the Herfindahl-Hirschman index (hereafter _HHI_) and the top four-firms' concentration ratio (_CR_4). The concept of the degree of industrial concentration is extended to the estimation of industrial penetration, in which case we use the Geographical Herfindahl-Hirschman index (_GHHI_) as a proxy for industrial penetration. The formulae for the degree of industrial concentration and the geographical concentration index may be explained simply, as follows:  
(1) Herfindahl-Hirschman index (_HHI_): The degree of industry concentration is used to measure the extent of the competition that is faced by an industry. The HHI for industry \(j\) is calculated, as follows:  
\[HHI_{j}=\sum_{i=1}^{n}S_{ij}^{2}.0\leq HHI\leq 1\] \begin{table}
\begin{tabular}{c c c} \hline \hline  & **Code** & **2-Digit Industry** & **Number of Firms** \\ \hline \multirow{8}{*}{Traditional industries} & 08 & Food & 6165 \\  & 09 & Beverages & 644 \\  & 11 & Textiles Mills & 6439 \\  & 12 & Wearing Apparel and Clothing Accessories & 4084 \\  & 13 & Leather, Fur and Related Products & 1870 \\  & 14 & Wood and Bamboo Products & 2849 \\  & 15 & Pulp, Paper and Paper Products & 3605 \\  & 16 & Printing and Reproduction of Recorded Media & 9439 \\  & 23 & Non-metallic Mineral Products & 3677 \\  & 32 & Furniture & 2849 \\  & 33 & Manufacturing Not Elsewhere Classified & 5435 \\ \hline \multirow{8}{*}{Technology-intensive industries} & 26 & Electronic Parts and Components & 6023 \\  & 27 & Computers, Electronic and Optical Products & 3717 \\  & 28 & Electrical Equipment & 6198 \\  & 29 & Machinery and Equipment & 18545 \\  & 30 & Motor Vehicles and Parts & 3580 \\  & 31 & Other Transport Equipment & 2905 \\  & 34 & Repair and Installation of Industrial Machinery and Equipment & 3907 \\ \hline \multirow{8}{*}{Basic industries} & 17 & Petroleum and Coal Products & 229 \\  & 18 & Chemical Material & 1549 \\  & 19 & Chemical Products & 2304 \\  & 20 & Medical Goods & 543 \\  & 21 & Rubber Products & 1756 \\  & 22 & Plastic Products & 11,012 \\  & 24 & Basic Metal & 4710 \\  & 25 & Fabricated Metal Products & 39,047 \\ \hline \hline \end{tabular}
\end{table} 
Table 1: Industry 2-digit codes and number of firms. where \(s_{ij}\) denotes the market share of firm \(i\) in industry \(j\), and \(n\) is the number of firms in industry \(j\), \(i=1,\;2,\;3,\ldots,\;n\). The \(HHI\) is obtained by dividing the individual manufacturer's sales by the total sales of the industry in order to arrive at each manufacturer's market share, which is then squared. The advantage of \(HHI\) is that the manufacturer's market share serves as a weight, with smaller manufacturers being given smaller weights and larger manufacturers being given larger weights. The lower is the \(HHI\) value, the lower the degree of concentration in the industry; the higher the value, then the higher is the degree of industrial concentration. (2) Top Four-firms Concentration Ratio (hereafter \(CR4\)): \(CR4\) is the weighted average of the market shares of the top four firms in an industry.