Summary
Highlights
Taiwan experienced rapid educational growth, driven by government policy and a deep-rooted societal desire for education. Between 1950 and 1979, total student enrollment increased significantly. The demand for advanced technologies led to a need for highly educated engineers, and many overseas Chinese with work experience returned to Taiwan, contributing to a reverse brain drain in the mid-1980s.
Taiwan's economic success is attributed to factors like strong work ethic, high savings, emphasis on education, and an outward-looking development strategy. The country prioritized technology development but faced challenges like a shortage of skilled technicians and researchers. Key questions for the government included how SMEs could survive rapid technological development and maintain competitiveness.
Taiwan's economic growth was driven by factors such as a strong work ethic, high propensity to save, and a significant emphasis on education. Land reform and foreign aid in early stages also played crucial roles. Education notably contributed to the improved quality of the labor force, enhancing productivity and facilitating labor mobility.
A significant way for Taiwanese firms, particularly SMEs, to acquire technology was through affiliation with major foreign manufacturers, often becoming OEM suppliers. This arrangement provided profits and minimized risks for SMEs, many of whom formed alliances with Japanese firms for technological cooperation.
The Taiwanese government played a highly active role in industrial technology upgrading. A national long-term development plant for science was adopted in 1959, leading to the establishment and expansion of the National Science Council. This council designed strategies and promoted scientific research in key areas like energy, materials, information technology, and biotechnology, aiming to improve quality of life, transform the economy, and develop an independent national defense system.
Taiwan's economy, heavily reliant on SMEs with limited R&D resources, leaned on government-sponsored research institutions for technology development and transfer. The Institute for Information Industry (III), established in 1979, focused on software technology, assisting government agencies, training professionals, and promoting computer-related technologies, aiming to make Taiwan a major player in the information industry.
To promote its software industry, Taiwan formed technological alliances with computer giants like IBM. The National Development Center (NDC), supported by III and IBM, provided exclusive software development and design services. This strategic alliance allowed IBM to enhance global competitiveness and enabled Taiwan to significantly upgrade its technological capabilities through knowledge transfer and training.
Beyond ITRI and III, numerous governmental bodies and councils were tasked with advancing science and technology. These included presidential office committees like the Guidance Committee on the Development of Science and Academia Sinica, as well as committees and ministries under the Executive Yuan, such as the National Science Council and the Ministry of Economic Affairs.
The globalized economy led to intensified competitive and complementary relationships in technology. Taiwan's government supported overseas mergers through low-interest loans and investment capital, enabling private companies to acquire needed technology and cope with globalization. Vast foreign exchange reserves made these international ventures feasible.
Taiwan's relatively strong defense is believed to rely on technology development for weapon systems. The Chungshan Institute of Science and Technology was crucial in developing these technologies, especially for the air force and navy. ITRI also conducted defense-related research, though more study was needed on the broader impact on industrial development.
Despite scarce data, available information suggested significant progress in Taiwan's science and technology development. In 1986, a large proportion of researchers held advanced degrees: 11.3% with doctorates, 23.5% with master's degrees, and 45% with bachelor's degrees, with 19.7% from junior colleges. The majority of these researchers worked in private businesses (47.8%), followed by research institutes (26.8%) and universities (25.4%). Engineering (16.6%) and natural sciences (12.6%) were prominent research fields.
South Korea, particularly its chaebols (large conglomerates), rapidly advanced in the electronics industry within 15 years in the early 1990s. They achieved this by learning production methods, reverse engineering products, and accumulating design skills, quickly establishing a strong position in the global market.
Government policies in the 1960s and 1970s fostered chaebols through favorable exchange rates, high savings, low inflation, and low interest rates. The government also protected local markets in computing and electronics, offering incentives that attracted Japanese firms to free trade zones. The Korean Trade Promotion Corporation (KOTRA) was created in 1980 to further support trade.
South Korea rapidly expanded its education system. By 1987, 98% of children received education up to age 14. College and university attendance soared, significantly improving the quality of the workforce. Direct Funded Industry Sector (DFIS) institutions like the Korea Institute of Science and Technology (KIST), established in 1966, were set up for applied R&D and to train engineers, leading to a further ten DFIS in the 1970s.
South Korea's GNP per capita grew from $87 in 1952 to $6,749 in 1992. By the 1990s, industrial goods, including electronics and chemicals, accounted for most exports, while agriculture's share of GNP declined. R&D manpower significantly increased, with the majority in private firms (55%), followed by educational institutes (30%) and government research (15%).
South Korean firms moved aggressively to the innovation frontier, with private firms accounting for over 80% of total R&D spending by 1988, a significant increase from earlier years. Leading companies like Samsung established advanced research institutes (SAIT) with substantial budgets and staff, illustrating a shift towards intensive private-sector R&D.
By the early 1990s, electronics was the largest industry in South Korea, with exports reaching billions of dollars. Local exporters focused on high-value, medium-level technology. Samsung engineers impressed the industry with 16-megabit dynamic RAM samples in 1990, and South Korean firms were significant players in both domestic and international electronic markets. However, much production was still in low-end components, and dependence on foreign firms for key components and technology imports remained high.
OEM (Original Equipment Manufacturer) and ODM (Original Design Manufacturer) activities significantly evolved. In the 1980s, private industrial R&D reached 80% of national R&D, largely focused on electronics. This growing complexity meant more R&D was needed to absorb overseas technologies. South Korean companies like Samsung also invested heavily in overseas high-technology companies and licensed advanced technologies, signaling a strategic shift.
By the 1990s, three large firms dominated Korea's electronics industry, with Samsung Electronics leading. Starting with simple products, Samsung became a massive company, diversifying into various electronic segments. Samsung's innovation in semiconductors, like its 64k DRAM, showcased its learning process engineering skills and product innovation capabilities. South Korean chaebols, however, faced challenges in innovation management due to their vertically integrated structures, potentially hindering agility compared to Taiwanese firms in entering new markets.
South Korean innovation, unlike the design-driven innovation of world market leaders, primarily focused on incremental improvements in manufacturing processes. The OEM system evolved into ODM, indicating competence in design but still leveraged foreign partners' advantages rather than blazing entirely new trails.