Small Country Innovation Systems
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Small Country Innovation Systems

Globalization, Change and Policy in Asia and Europe

Edited by Charles Edquist and Leif Hommen

This major book presents case studies of ten small country national systems of innovation (NSIs) in Europe and Asia, namely, Denmark, Finland, Hong Kong, Ireland, the Netherlands, Norway, Singapore, South Korea, Sweden and Taiwan. These cases have been carefully selected as examples of success within the context of globalization and as ‘new economies’ where competition is increasingly based on innovation.
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Chapter 2: The Rise and Growth of a Policy-driven Economy: Taiwan

Antonio Balaguer, Yu-Ling Luo, Min-Hua Tsai, Yee-Yeen Chu and Feng-Shang Wu


2. The rise and growth of a policydriven economy: Taiwan Antonio Balaguer, Yu-Ling Luo, Min-Hua Tsai, Shih-Chang Hung, Yee-Yeen Chu, Feng-Shang Wu, Mu-Yen Hsu and Kung Wang 1 INTRODUCTION Over the last 40 years, Taiwan has been an example of sustained economic growth. The empirical richness of Taiwan’s economic and social transformation provides a good source for testing theories, hypotheses and models of growth. ‘Systems of innovation’ approaches and concepts are useful in capturing some of the key elements of the ‘Taiwanese story’, which we have characterized as a ‘policy-led systemic upgrading’, involving a complex process of co-evolution among actors, institutions, knowledge, technology and markets. The foremost aspect in the ‘Taiwanese story’ is that Taiwan was a latecomer in terms of its industrial development and learning how to compete in world markets. A second and related aspect is the role of government and public policy. Here, the crucial point is not simply that the government intervened in development, but that it played a key strategic role by changing the economic base to produce new comparative advantages and creating new market segments in which Taiwanese firms could compete (Amsden and Chu, 2003). A third aspect of the ‘Taiwanese story’ is specialization. Rather than sectoral specialization, we refer to a unique capacity to adjust quickly to patterns of changes in global demand by upgrading and excelling at the project execution level in original equipment manufacturing (OEM) and original design manufacturing (ODM). Specialization in these areas means that Taiwanese firms occupy a particular...

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