This paper evaluates the ability of Taiwanese firms to become technological innovators as the Taiwanese economy shifts from a period of catch-up to the process of developing new technologies befitting its now high level of economic development. Rather than ask the older question of how can Taiwan develop, this paper asks in which technologies can Taiwanese firms succeed in becoming innovators and in which technologies are their prospects of attaining innovation quite limited. From an analysis of the attempts of Taiwanese firms to compete in three high-technology product segments of the electronics industry, complimentary metal oxide silicon (CMOS) logic fabrication, dynamic random access memory (DRAM) and active matrix liquid crystal displays (AMLCDs), this paper argues that Taiwan can become an innovator in those product areas sharing the following characteristics: a high level of granularity in the production chain, high volume production, manufacturing-based outputs and no requirement for large amounts of patient capital. Products sharing these characteristics are able to utilize the strengths of the Taiwanese economy, and drawing upon these strengths greatly increases the likelihood that firms can overcome the technological and economic barriers to innovation.
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