Taiwan
Taiwan, along with South Korea, took a unique approach known as the developmental state approach. The similarity between Taiwan and South Korea is that they both are prototypical examples of developmental state theory: utilising industrial policies to promote targeted industries.
Taiwan, however, differs from South Korea in that its more complex industrial organisation resulted from the unique political history of Taiwan.Taiwan has one of the most competitive education systems in the world. In addition, Taiwan's uniqueness is that it tried to emulate Stanford University/Silicon Valley by connecting science and technology oriented universities, National Chiao Tung University and National Tsing Hua University, to the industry in the Hsinchu Science and Industry Park (HSP).
Taiwan's industrial policies have been as extensive and intensive as South Korea's. A pilot agency, the Committee for Economic Planning and Development (CEPD), developed these policies. The government established a technology research institute, the Industrial Technology Research Institute (ITRI), which played a key role in Taiwan's high-tech industrial development, particularly in the field of information technology. Unique aspects of the government involvement in industry are the establishment of the HSP mentioned above. Considering that the chronic trade deficit with Japan was problematic due to heavy imports of semiconductors, in spite of the development of consumer electronics, the Taiwanese government decided to launch a programme to start semiconductor production. However, due to a rift between the Taiwanese and the mainlanders, local Taiwanese corporations were reluctant to join this plan. Facing a lack of interest among Taiwanese companies, the government decided to use government laboratories to develop a semiconductor, having established the Electronic Research and Service Organisation, or ERSO, under the ITRI.
Once a product is developed, the Taiwanese government allows the laboratory to be ‘spun off' from the ITRI to become a private company. Government engineers quit their government jobs and became private entrepreneurs. This ‘spin-off' business worked well. For example, the largest semiconductor company in Taiwan, TSMC, and the second largest, UMC, are both the products of this ‘spinoff ' scheme in the HSP.Taiwan is connected to Japan in two ways. First, Taiwan was the first colony of Japan before World War Two. From 1895 to 1945, Taiwan was under Japanese control. During this time, Taiwan experienced a predecessor of industrialisation particularly in the 1930s when Japan invested in heavy and chemical industries in colonised Taiwan. Even prior to this, Japan tried to make Taiwan a model of successful colonial management to impress Western powers under the governorship of Shinpei Goto. After World War Two, Taiwan became a major destination for Japan's foreign direct investment.
Taiwan's connections with the United States are the highest among the Asian Tigers. After World War Two, the United States became a key protector of Taiwan as well as the source of investment, and many Taiwanese migrated to the United States. The expatriates who moved to the United States, particularly in California, never severed connections to Taiwanese businesses. As Taiwan's economy moved to more sophisticated manufacturing, particularly in the IT industry, the demand for the engineers who were trained in US higher education rose dramatically. Organisations such as the Monte Jade Science and Technology Association helped nurture continuous ties between the Taiwanese expatriates, particularly in Silicon Valley, and the companies in Taiwan.
What makes Taiwan's case unique in its relation to the United States is the government effort to connect to US expatriates upon initiating the semiconductor industry. As discussed above, the Taiwanese were reluctant to accept the government invitation to develop a semiconductor industry. The government decided to communicate with expatriates in the United States and ask for their return to Taiwan, providing them with favourable monetary and patriotic incentives. Morris Chang, who headed the TSMC, was a typical example. Chang was an engineer at Texas Instruments for years but had faced a glass ceiling for promotion as being non-Caucasian. He accepted the government invitation and worked in the ITRI and eventually spun-off to establish the largest Taiwanese semiconductor company TSMC. Thus, the relation between the United States and Taiwan is strong through multiple channels. Without this connection, Taiwan's IT development would have been much harder to achieve.