Objective: The purpose of this study was to examine the relationship between the neighborhood effect and hospital's willingness to participate in quality indicator projects. Methods: A total of 238 hospitals registered in Taipei and Kao-Ping branch of Bureau of National Health Insurance, were recruited in this study. The dependent variable is whether hospital chooses to join the Taiwan Quality Indicator Project (TQIP) and Taiwan Healthcare Indicator Series (THIS). By employing geographic information system, we calculated distance-based and boundary-based competition indices (Herfindahl-Hirschman Index and hospital density). Hospital service volume was used as control variables. The logistic regression was used to compare the different definition of neighbor effect.Results: The results showed that the characteristics differed significantly between hospitals that participated in quality indicator projects and those that did not. However, after controlling for covariates, only number of beds was a significant discriminator. By employing the geographic information system, we developed twelve competition indices. Most of these, especially the Herfindahl-Hirschman Index at 5km radius, improved the model fit significantly.Conclusions: There has been considerable controversy about the appropriate measurement of hospital competition in the literature. This paper adopts the two most common definitions of hospital market area and the two most common methods of measuring the intensity of competition within an area and to assess whether different measures of hospital competition matter in empirical investigations of hospital behaviors. The results imply that the structural feature of market environment is also an important factor for understanding hospital behaviors.