We investigate the relationship between knowledge and productivity levels and growth using firm-level panel data in Taiwan. In addition to R&D stock, we also employ patent counts to construct the output-side indicators of knowledge to explore the relationship between knowledge and productivity. The empirical results show that both R&D and patents have significant impact on the productivity level in Taiwan. The elasticity of patent stock is about five times larger than that estimated by R&D stock as a proxy of knowledge. We also find a very significant contribution of R&D and patents to productivity growth. This implies that R&D investment has been very productive in increasing output for Taiwanese manufacturing firms in the 1990s.