An Empirical Examination on the Sustainable Growth Model of Small & Medium Size Electronics Companies In Taiwan

Benefited from the growth of home appliance industry and the emergence of personal computer industry, Taiwan''s electronics and information technology (IT) companies have expereinced phenonomenon growth based on original equipment manufacturing (OEM) business model under global division of labor and vertical specialization. As a result, Taiwanese IT companies have played an indispensable role in the global supply chain. However, constant technology change and competitive intensity also led to a high change over for the small and medium size enterprises (SMEs). How to manage sustainable growth becomes a critical issue for these SMEs and hence an interesting research issue for the present thesis. To investigate the typologies and evolution of different growth models of these SMEs in the IT sector, we conducted a two-stage empirical examination based on selected listed SMEs from the Taiwan Stock Exchange Market during the year of 2000 and 2009, in which time period we further divide it into two five-year periods for comparative investigation. To evaluate these SMEs'' performance in these two time periods, we first undertook compound annual revenue growth rate and return on equity as two critical performance indices, under which the growth performance matrix were established and differential growth trajectories were revealed. We then selected 12 companies for further case studies based on their value chain positions and radical changes of performance between two time periods.This research highlights several key observations. First, with resource and capability constraints, SMEs in the IT sector maintain their bottom-line growth higher than top-line growth. Those who pursue only top-line growth by low price strategy eventually would fail in the ball game. Second, we also found that those high performers usually maintain two to three growth engines to support their continuous growth, regardless of their value chain position. Neverthless, the performance of diversified mergers was commonly unsatisfactory. Third, one of the critical growth model for semiconductor manufacturers is to expand their product portfolio and to provide multi-dimentionsal services. But, for channel distributors, achieving high asset turnover is the key to sustainable profit. Therefore, using M&As and financial leverage strategies play an important role to uphold the growth trend of these companies. This is quite different compared with the manufacturing companies whose important growth strategies are through market penetration and expansion of product portfolio. With all these observations, our paper provides suggestions for SMEs to nurture a sustainable growth model and recommendations for further research in this important area.