This study explores technological innovations and industry clustering in the bicycle industry in Taiwan. It shows that clustering in the bicycle industry not only decreases transaction costs among the firms in the cluster but also increases cooperation and efficiency between the bicycle manufacturers and their partners as a result of standardization and modularization of bicycle components. Following a patent analysis, the study finds that two systems—the wheel system and the bicycle frame system—are the strengths of Taiwanese bicycle and component manufacturers; conversely, the transmission (i.e., gears) and brake systems are their weaknesses. Moreover, industry clustering increases the efficiency of information exchange such that the spillover effect of technological innovation is significant.
