Industrial Upgrading through Low-cost and Fast Innovation—taiwan's Experience

This paper examines the forces that drive Taiwan‟s new strategy of “Upgrading through Low-Cost and Fast Innovation”. The first section highlights characteristics of Taiwan‟s traditional “Global Factory” innovation model and examines the role of innovation policy in that model. Section 2 reviews fundamental weaknesses that define the requirements of Taiwan‟s new innovation strategy. Section 3 explores Taiwan‟s new strategy of “low-cost and fast innovation through domestic and global innovation networks”. Finally, section 4 examines the role of government and key policies and initiatives in the IT industry. 1 This paper is a first draft of a book chapter in Ernst, D., forthcoming, Competing Approaches to Industrial Innovation – US, China, Taiwan, and India. An earlier draft was prepared as a background report for the 2012 US National Academies study The New Global Ecosystem in Advanced Computing, http://www.nap.edu/catalog.php?record_id=13472 . The analysis of Taiwan‟s innovation policy draws on Ernst, D. 2010, “Upgrading through Innovation in a Small Network Economy: Insights from Taiwan's IT industry", Economics of Innovation and New Technology, Vol.19, No.4: p.295–324; Science & Technology Policy Research and Information Center, Yearbook of Science and Technology Taiwan ROC 2010, Taipei, http: // yearbook.stpi.org.tw; Ministry of Economic Affairs, 2011, 2011 White Paper on Taiwan Industrial Technology, Taipei, http://doit.moea.gov.tw/itech/eindex.asp?TYear=2011; Chen, Shin-Horng, 2010, Country Report Taiwan, prepared for European Commission, International Center for Economic Growth, Contract # 150970-2008 F1SC-HU, October; Larsen, P.B. et al, 2011, “National Innovation Policy Profile Taiwan”, in Cross-Sectoral Analysis of the Impact of International Industrial Policy on Key Enabling Technologies, Final Report, prepared for the European Commission, DG Enterprise & Industry, March 28, pages 193200; Sha, K.H.C. et al, 2008, ÍTRI‟s Role in Developing the Access Network Industry in Taiwan, in H.S. Rowen, M.Gong Hancock and W. F. Miller, eds, Greater China‟s Quest for Innovation, The Walter H. Shorenstein Asia-Pacific Research Center; Chu, Hsin-Sen, 2007, “The Taiwanese Model: Cooperation and Growth”, in Wessner, C.W., editor, Innovation Policies for the 21 Century. A Report of a Symposium, The National Academies Press, Washington, D.C., pages 112-120; Chen, Tain-jy, 2004. “The Challenges of the Knowledge-Based Economy”, in: Chen, Tain-jy and Joseph S. Lee (eds), The New Knowledge Economy of Taiwan, Cheltenham: Edward Elgar; and Ernst, D., 2000, “What Permits David to Grow in the Shadow of Goliath? The Taiwanese Model in the Computer Industry”, in: Borrus, M., D. Ernst and S. Haggard (eds.), International Production Networks in Asia. Rivalry or Riches?, London: Routledge. Additional sources include the CIA Fact book: Taiwan. 2011, https://www.cia.gov/library/publications/the-world-factbook/geos/tw.html; Tsai, T. and B.S. Cheng, eds, 2006, The Silicon Dragon. High-Tech Industry in Taiwan, Edward Elgar, Cheltenham, UK etc; and Addison, C., 2001, Silicon Shield. Taiwan‟s Protection against Chinese Attack, Fusion Press, Irving, Texas.