# A Statistical Analysis of Industrial Penetration and Internet Intensity in Taiwan +
## 1 Introduction  
With the arrival of the internet era, internet intensity by business enterprises has continued to increase significantly in recent years. Furthermore, the proliferation of internet technology has enhanced the development of electronic commerce and online shopping. Internet technology has replaced long-distance non-electronic communications (such as communications and business travel), and has thereby reduced the costs of relaying information over long distances, thus making it easier for businesses to communicate with each other over such long distances. Taiwan's overall industrial internet intensity (that is, the proportion of enterprises that uses the internet) has increased from 62% in 2002, to 79% in 2003, and to 94.3% in 2010. According to reports that were prepared by the Institute for Information Industry in 2008, 2009, and 2010 (see [1] [PERSON] (2009) for 2008 and 2009, and [2] [PERSON] (2010) for 2010), the growth of the internet has been increasing rapidly, especially in the manufacturing industry and distribution services. As internet intensity continues to develop and information is exchanged increasingly rapidly, the management information systems of businesses are becoming increasingly complete, to the extent that firms can use the internet to communicate and share information with other enterprises, both directly and in real time. It is for this reason that businesses have been able to decrease their costs of communicating and collecting information. Owing to the increased convenience that the internet has brought in enabling firms to communicate with each other, in reducing the costs of transportation, as well as an abundance of resources that has further sped up the exchange of information, the \"distance\" factor is clearly no longer as important as it was in the past for online purchases. According to the 2009-2013 Global Competitiveness Report that was compiled by the World Economic Forum, Switzerland, the state of cluster development for Taiwanese industry was ranked first in the world for three consecutive years from 2006 to 2008, with Taiwan being hailed as a model for the development of global innovation and industrial clusters. Despite its ranking falling to numbers 6 and 3, respectively, in the following two years, the state of its cluster development enabled Taiwan to receive a score of 5.5 (of a maximum of 7) in 2014, thereby regaining its leading position in the world. As for the pattern of spatial distribution of Taiwan's industrial clusters, the northern region is characterized by \"electronics technology industrial clusters\", the central region by \"precision machinery industrial clusters\", and the southern region by \"electrical machinery industrial clusters\". Each of the industrial clusters is well developed ([3; 4; 5; 6] [PERSON] and [PERSON], 2009, 2010, 2011, 2012). In the existing literature, many scholars have focused on R&D and new technology ([7] [PERSON] and [PERSON], 1996; [8] [PERSON] and [PERSON], 2002; [9] [PERSON] and [PERSON], 2009). Some scholars have examined the relationship between internet intensity and urbanization economics ([10; 11; 12] [PERSON] et al. (2005a, b, c), [13] [PERSON] and [PERSON] (2008), [14] [PERSON] and [PERSON] (1998)), as well as a link between computers and productivity ([15] [PERSON] and [PERSON], 2005). However, there has been little research undertaken on the relationship between internet intensity and industrial penetration. Moreover, when we consider that for the total expenditure on internet intensity, actual figures are observed only if the firm uses the internet, which will lead to the problem of sample selection bias. For this reason, the purpose of this paper is to include the effect of sample selection bias correction, in order to examine whether a relationship exists between industrial penetration (geographic concentration of industries) and internet intensity, and to analyse the factors determining the extent of the internet's influence.