This paper investigates the roles of R&D activity and outward investment in skill upgrading, that is, a rise in the skilled labor share of employment and the wage bill, for the Taiwanese manufacturing sector. The results show that the importance of R&D activity and outward investment in China depends on the industrial heterogeneity of R&D intensity. For instance, in the high R&D-intensive industries, the shift in demand for skilled workers can be significantly and dominantly explained by R&D activity, while in the low R&D-intensity industries both R&D intensity and outward investment in China have played a role in explaining the skill upgrading, with the former being more important than the latter. Thus, in contrast to the case of Hong Kong, skill-biased technological change is a more important factor in explaining the skill upgrading of Taiwanese manufacturing.
