South Korea and Taiwan

This chapter analyzes catch-up experiences in South Korean and Taiwanese firms to argue that success calls for continuous upgrading in the same industry, as well as successive entry initiatives into new industries. In upgrading, the dilemma faced by firms was how to acquire design capability for product differentiation and innovation, while keeping their technology transfer lines open. The Korean solution included cross-subsidizing R&D among affiliates and R&D consortia with government research institutes (GRIs). The Taiwanese solution was to rely on the GRIs that developed components, technology for which was transferred to private firms. In fashioning successive entries, Korean firms were independent, not relying upon transfer from the incumbent firms but rather hiring engineers from them and building their own capabilities. In comparison, the Taiwanese firms were interdependent with sector pioneers, relying upon technology transfer from GRIs or from Japanese and other firms through participation in global production networks.