chapter  7
34 Pages

Innovation and the Limits of State Power: Integrated Circuit Design and Software in Taiwan

ByDan Breznitz

Of the East Asian newly industrialized economies (NIEs), Taiwan’s story is one of the most inspiring. Taiwan is the only society in the region that closed, in many critical aspects, the gap in innovational activities with the leading Western industrial nations and Japan-the G7.1 Taiwan has also developed a vibrant industrial system of indigenous new small and medium-sized enterprises (SMEs) that is not dominated by a few huge conglomerates or subsidiaries of foreign multinational corporations (MNCs). Today most Taiwanese companies specialize in producing systems and equipment for other companies. In the “new global economy” this is a position of strength. But, the fact that Taiwan has yet to foster a significant number of companies that can develop new products and not just improve and innovate on products developed elsewhere suggests a major concern that its industry may be unable to capture the lucrative rents that come with skills that bring new products to market first.2