Abstract
Taiwan’s phenomenal post-war economic growth has been globally praised as a miracle. In an article published by U.S.-based magazine Business Week (2005), “Why Taiwan Matters?” it stated that “the global economy couldn’t function without it.” Considering the pivotal role played by Taiwan’s electronics industry, this is indeed not an overstatement. How Taiwan was able to reach this stage has instigated a series of studies and proffers an interesting lesson for latecomers. In the World Bank Policy Research Report (1993), Taiwan’s successful economic development stands out as a vivid example within these East Asian economic miracles. The report is obviously based on the neoclassical growth theory although it admitted that there are also non-economic factors, including culture, politics, and history, important to the East Asian success. The entrepreneur, who literally expedites the resources to efficient and effective allocation, is treated as a non-economic factor and is completely ignored.
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- 1.
For example, Taiwan IC Foundry and SATS (semiconductor assembly and test services) were ranked No. 1 among global leading players with significant worldwide market share in 2010. The two Taiwanese IC foundry groups, TSMC and UMC were the No. 1 and 2 Foundry service providers globally. They were also ranked among the world top 10 semiconductor capital spenders in 2010 where TSMC and UMC were the No. 2 and 6 with capital expenditures of $5,928 millions and $1,854 millions respectively. See “2011 Taiwan IC Industry Forecast”, Invest in Taiwan, Department of Investment Services, Ministry of Economic Affairs, 27 June, 2011 (see http://www.moeasmea.gov.tw/lp.asp?ctNode=332&CtUnit=28&BaseDSD=7&mp=2; accessed on 8 August, 2011).
- 2.
The report states that the superior performance can in large part be explained by having achieved six “fundamentals” better than other economies: (a) stable macroeconomy, (b) high levels of human capital, (c) an effective and secure financial system, (d) productive agriculture, (e) limited price distortion (getting price right), and (f) openness to foreign trade, investment, and technology.
- 3.
- 4.
Terry Gou is the CEO of Hon Hai Precision Ind.—a typical “black-hand” apprentice-turned industrialist who is one of Taiwan’s wealthiest citizens. Barry Lam was born in Shanghai, raised in Hong Kong, went on to study electrical engineering at National Taiwan University, and is the founder and Chairman of Taiwan notebook PC manufacturer Quanta Computer.
- 5.
According to White paper on SMEs in Taiwan, 2010 (Small and Medium Enterprises Administration, Ministry of Economic Affairs R.O.C.), there are about 1.23 million SMEs in Taiwan in 2009. These establishments make up about 97.9% of total enterprises, 77.5% of all employment and 16.9% of total export sales value in Taiwan.
- 6.
Hayek (1945, p. 519) noted that “the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess”.
- 7.
- 8.
See Lam and Lee (1992) about guerrilla capitalism.
- 9.
Yu (1999) first used the term guerrilla entrepreneurship to describe the dynamics of Hong Kong manufacturing firms. Wang (1995/1996) took the term guerrilla capitalists to describe Taiwan’s information and technology industry. Guerrilla entrepreneurial strategies are said to be essential to Hong Kong’s industrial development (Yu 1997).
- 10.
The concept of international production networks (IPNs) is an attempt to capture the spread of broader and more systemic forms of international production that cut across different stages of the value chain and that may or may not involve equity ownership. Such networks constitute an important organizational innovation that enables multinational corporations to cope with the conflicting requirements of specialization and coordination (Sturgeon 1997, p. 38, note 73). For instance, in the PC industry, final assembly is most likely dispersed to major growth markets in the U.S., Europe, and Asia; microprocessors are sourced from the U.S.; memory devices from Japan and South Korea; motherboards from Taiwan; hard disk drives from Singapore; monitors from South Korea, Taiwan, and Japan; keyboards and power switch supplies from Taiwan (ibid, p. 36).
- 11.
Chapter 3 will further explore how Taiwanese entrepreneurs compete and survive in mainland China.
- 12.
Chi-Mei Industrial Co. was founded in 1953 and mainly did plastic processing. The production of ABS (acrylonitrile butadiene styrene) made Chi-Mei well-known. In 2000, Chi-Mei Optoelectronics was founded and has since become a world-known producer of TFT-LCD panels.
- 13.
In 1984, Taiwan had only 28 colleges and universities with 185,000 students. In 2005, it jumped to 145 universities and colleges with more than 1 million students enrolled, pursuing higher education.
- 14.
Morris Chang was a Vice President of Texas Instruments, where he worked for 25 years (1958–1983), before he came back to Taiwan and founded TSMC in 1987.
- 15.
In fact, Taiwan’s government expedites different plans to prepare for the next stage of its economic development. For example, in the Fifth Plan (1969–1972), it focused on promoting export expansion, intensifying infrastructural development, upgrading industrial structure, etc., while in the Twelfth Plan (2001–2004), it focused on providing a sustainable environment, developing a knowledge-based economy, etc.
- 16.
Choo (2000) alluded to the retrospect of the Kuomintang government not to repeat its past mistakes of losing China due to the corrupted link between government and businesses and stressed to implement the policy to foster small and medium-sized enterprises (SMEs) in Taiwan.
- 17.
As noted by Greenhalgh (1995), in most of the societies that have been studied, family entrepreneurship has declined in importance as industrialization has proceeded. In Taiwan, despite rapid industrialization, there is no sign—at least not yet—that families have relinquished their control over the island’s economy.
- 18.
Tainan Ban and San-tsun Ban are run by Wu’s and Lin’s family and their relatives, respectively, and the former is mainly consisted of people from southern Taiwan while the latter is from the north.
- 19.
Greenhalgh (1995) concluded four factors of Taiwanese family firms: (a) use of family members to staff key positions and the alignment of these positions with members’ age, sex, and generation; (b) a package of individual incentives and group risk insurance; (c) the use of networks of kins and friends to recruit labour, capital, and information; (d) strategies of spatial dispersal and economic diversification.
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Yu, FL.T. (2012). Taiwan’s Economic Development: The Role of Entrepreneurship and its Incubating Factors. In: Entrepreneurship and Taiwan's Economic Dynamics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-28264-5_1
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