# A Statistical Analysis of Industrial Penetration and Internet Intensity in Taiwan +
## 2 Firm's Internet Intensity and Geographical Concentration  
[10] [PERSON] et al. (2005a) proposed three related theories for the relationship between internet technology and urban penetration (urbanization), namely (1) global village theory; (2) urban density theory; and (3) industry composition theory. The global village theory suggests that the new network technologies would help to break down the barriers between individuals and groups. Internet technology can make up for the disadvantages that are faced by manufacturers due to their being located far from the city's center of economic activity. For this reason, there is a substitute relationship that exists between the adoption of internet technology and urban penetration. Urban density theory suggests that, as the density and scale of urbanization increase, the costs that are borne by manufacturers using internet technology will be reduced. In other words, if the manufacturer is located in the city center, a reduction in the cost of using internet technology will increase internet intensity, so that a complementary relationship exists between the adoption of internet technology and urban penetration. Industry composition suggests that, when the density and scale of urban areas increase, the benefits that manufacturers derive from using the internet will increase. Before network technology began to be used widely, manufacturers had already decided where to locate their activities, so that large numbers of manufacturers using the information-intensive technology industry tended to agglomerate in certain areas. Such firms were inclined to locate their operations in urban areas, so that the demand for the internet was greater in these built-up areas. Therefore, the demand for the internet increased with the scale of urbanization. For this reason, a complementary relationship exists between the intensity of internet technology and urban penetration. [10] [PERSON] et al. (2005a) used US data to examine the relationship between internet intensity and urbanization, and found that, when the number of manufacturers in leading industries in urban areas increases, this will cause internet intensity in such regions to increase. This indicates that the use of the internet will be enhanced as the scale of urbanization increases, so that a complementary relationship exists between internet intensity and urban penetration. [11] [PERSON] et al. (2005b) compared the influence of the location of enterprises and industrial penetration on internet intensity for information intensity and information-producing manufacturing industries, and discovered that, in the areas in which manufacturers were located, the larger was the scale of industrial penetration, the greater would manufacturers use the internet. A similar result from US business data from [16] [PERSON] (1999) also indicated a complementary relationship between the internet intensity rate and the scale of urbanization. In an alternative investigation on information technology-related manufacturing industry in the US (computer and peripheral parts manufacturing, semiconductors, and other components manufacturing) and information technology-related service industries (software publishing, computer systems design, and related services), [17] [PERSON] and [PERSON] (2007) tested three hypotheses: (1) internet intensity reduces the market linkages of two manufacturing and two service IT industries; (2) the effects of internet intensity on the market linkages of two manufacturing and two service IT industries will be the same for the IT-related industry and information technology-related service industries; and, (3) the effects of market linkages of two manufacturing and two service IT industries in urban and non-urban areas would be the same. Their results indicated that internet intensity would lead to a reduction in the market linkages of two manufacturing and two service IT industries, and that the internet effect would be less pronounced in urban areas than in rural areas.