Leading, Following or Cooked Goose?: Innovation Successes and Failures in Taiwan's Electronics Industry

Abstract

This paper evaluates the reasons behind the innovation successes and failures in the Taiwanese electronics industry by comparing the innovation outcomes for three products: CMOS logic, DRAM and AMLCD. The determining factors of success and failure are whether the products in which Taiwanese pursue innovation have these following characteristics: granularity of production, no need for large amounts of patient capital, volume production and manufacturing-based. In turn, this paper argues that products with these characteristics succeed because these product characteristics draw upon the institutional and historical strengths of the Taiwanese economy. The paper also broadens the inquiry to assess what lessons the Taiwanese innovation successes have for developing countries. Principally, the new lesson Taiwan has to offer is that countries can become innovators by concentrating their human and financial capital through granularization of production.

Keywords: Taiwan, ICs, industrial policy, technology policy, integrated circuits, displays, AMLCDs, DRAM, granularity, modularity, value chain, GVC