New firm formation and technical upgrading in the Taiwanese semiconductor industry: Is petty commodity production still relevant to high-technology development?
Journal
Petty Capitalists and Globalization: Flexibility, Entrepreneurship, and Economic Development
Pages
145-165
Date Issued
2005
Author(s)
Abstract
Over the past decade, many political scientists, economists, sociologists, anthropologists, and economic geographers have proposed that there has been a resurgence of regional economies (Piore and Sabel 1984; Sabel 1989; Best 1990; Blim 1990; Scott and Storper 1992). They argue that the concentration of interconnected specialist firms in a region constitutes collective strength for global competition. Most of these researchers focus on agglomerations of small- And medium-sized enterprises (SMEs) that specialize in different but related phases of production in an industry. The vertically disintegrated industrial system prevails in Taiwan's IC (Integrated Circuit) sector, one of the most prominent hightechnology industries. Taiwan's IC industry is not dominated by a small number of vertically integrated large corporations, but by a great number of small firms that target certain market niches and collaborate under different roofs (Mody and Wheeler 1990; Mathews 1997). One of the advantages accompanying this industrial system is the easy formation of new firms. The system allows new firms to focus on development of new product ideas, without disturbing other phases of the production process. Furthermore, economies of scope, rather than economies of scale, reduce production costs for participating firms. In addition to the static advantage of cost-saving, the integration of interconnected independent firms creates the possibility of mutual adjustment within the system. This allows firms to handle abrupt crises flexibly. The process of new firm formation and the method of technological learning in Hsinchu are critical for the rethinking of Petty Commodity Production (PCP) in the globalizing knowledge economy, which is characterized by flexible specialization and industrial clustering (Cooke 2002). Firms' competitive advantage in the new competition era comes not from ruthless cost reduction, but from competence in nimble adjustment of production chains. In the new competition, firms' technological capability for innovation is the key weapon (Best 1990). This is particularly the case for high-technology industries. As PCP is usually connected with preindustrial, domestic, and outdated technology, will it still be relevant to the new economy? If it still works, then in what sense and aspects? Is it just a survival strategy for peripheral sectors, such as Taiwanese SMEs, or part of the ingredients of core competence in the hightechnology battlefield? How will Taiwan's small high-technology firms survive and prosper in the global competition, which is controlled by key advanced giants? This research will demonstrate that the decentralized industrial system of SMEs in the Hsinchu region builds up complementary connections with Silicon Valley in technology and industry. Through these connections, an overseas Chinese technical community plays the key role in technology transfer. In a sense, the interpersonal relationships and incarnate trust characteristic of the PCP world could serve as channels of ideas, particularly for tacit knowledge, which could not be transferred in printed formats. Moreover, this chapter will demonstrate that the PCP networks can be institutionalized to render technology transfer and starting up easy and constitute the backbone of the formal cross-border technology agreements and licensing. In the next section, we will elaborate on the industrial structure and its governance mechanisms to flesh out the social dimensions of Taiwanese IC industrial system. Then we will illustrate the strategies Taiwan's IC SMEs adopt to upgrade their technical levels. Among them, the connection with the high-technology hub, Silicon Valley, is particularly critical. We will argue that thick social ties and industry associations are key mechanisms in the cross-border connections. Finally, we will reflect on the role of PCP in the globalizing knowledge economy, and argue for the growth potential of PCP in the modern capitalist world, as the cross-border technical communities between Hsinchu and Silicon Valley demonstrate. © 2005 State University of New York. All rights reserved.
SDGs
Type
book