It is widely believed that the promotion and development of high-tech industries by the Taiwanese government in the past two decades has been one of the most important factors that maintain Taiwan with an above-average rate of economic growth. However, investment on R&D activities and consequently the development of high-tech industries is usually inevitably accompanied by a promotion of energy consumption, and hence the deterioration of the environment. Additionally, it is not always guaranteed that investing in high-tech industries will certainly improve the performance of the economy. This paper explores energy use, environmental performance, resource allocation, as well as economic performance issues of the Taiwanese economy resulting from an additional high-tech R&D investment through a multi-stage investigation process. In the first stage, we estimate a set of cost functions to examine the contributions and channels of R&D investment and inter-industry R&D spillovers for some major manufacturing industries. It is interesting to see how and to what extent high-tech R&D investment have contributed to the reduction in cost for manufacturing industries. For the purpose of finding out how a sector is affected by other sectors’ R&D activity, inter-sectoral technology flow matrices for several years are also established to figure out which sectors are the most important sources of R&D spillover for a specific sector. In the second stage, the estimation results from the previous stage are fitted into a multi-sector computable general equilibrium (CGE) model to examine the effects of high-tech R&D investment and spillovers on energy use, environmental performance, resource allocation and economic performance of the Taiwanese economy.
