Academic journal article Innovation: Organization & Management

Cluster Policies and Industry Development in the Hsinchu Science Park: A Retrospective Review after 30 Years

Academic journal article Innovation: Organization & Management

Cluster Policies and Industry Development in the Hsinchu Science Park: A Retrospective Review after 30 Years

Article excerpt

In the past 60 years, Taiwan has undergone several stages of economic transformations, namely, agriculture, labor-intensive light industry, and capital-intensive industry. In the first stage, when the national government of the Republic of China retreated from Mainland China to Taiwan in 1949, Taiwan mainly had an agricultural econ- omy. To stimulate its agricultural base, the gov- ernment issued the 'Farm Land Rent Reduction Regulation' to reduce the burden and to increase the incentives of tenant-farmers for higher pro- ductivity. The regulation was followed by the 'Land-to-the-Tiller' policy,1 which released pub- lic and private lands for the utilization of farm- ers. The policy was successful and stabilized the political and economic situations of Taiwan dur- ing those troubled times.

When the United States stopped granting economic aid to Taiwan in 1965, the coun- try was faced not only with political crisis, but also with rapid population growth, high unem- ployment rate, shortage of foreign reserves, and financial burden. Taiwan was determined to transform its economy from an agriculture-based to an export-oriented light industry. In 1966, Taiwan combined the functions of a free-trade area, a duty-free zone, and an industrial park to create its first Export Processing Zone (EPZ). For almost a decade, the EPZ helped Taiwan maintain an average economic growth rate that exceeded 10%. This 'Taiwan economic miracle' not only set a historical precedent for Taiwan in creating its small and medium enterprise (SME) industrial base and in raising its foreign reserves, but also provided an economic development model for the world.

In the 1970s, the world was troubled by energy and food crises, marked by stagnation in many industrial countries. The situation put Taiwan in a predicament of rising labor costs, outdated products, and declining exports. With the prior success of the EPZ, the government realized that it must bring in new technologies and indus- tries, along with high-quality labor to accelerate national innovation, upgrade industry, and trans- form the economy of Taiwan into a capital-inten- sive driven industry focused on innovation. As a result, in 1980, the Hsinchu Science Park (HSP) was established and patterned after the Silicon Valley model of the United States. The mission of the HSP was to build a high-quality working, liv- ing, and leisurely human environment to attract high-quality technical people, bring advanced technology and R&D, and form a base for high- tech industries.

Only 14 companies2 participated when the HSP was first established. After 30 years of con- tinual support, the government invested over $2.8 billion to develop 653 ha of land. In 2010, HSP hosted over 460 companies,3 with annual sales of $34 billion,4 which accounted for 8.16% of the annual gross domestic product (GDP) of Taiwan, and employed over 130,000 people. Over the past 30 years, HSP has accumulated $412 billion worth of sales and employed over 1.43 million people. According to a 2009 R&D innovation survey by the Department of Economics, the number of intellectual properties (IP) in semi- conductor and optoelectronics ranked between the top three and six in the world. In the Global Competitiveness Report 2010-2011 issued by the World Economic Forum, Taiwan placed 13th among 133 countries in global competitiveness, while its innovation sub-category ranked 7th (Schwab, 2011). Therefore, HSP not only plays a leading role in the development of the high-tech industry in Taiwan, but also serves as the driv- ing engine behind the innovation and economic miracle in Taiwan.

However, in a rapidly changing world, will the industry composition, strategy, and com- petitiveness of HSP be sustained after 30 years of development? This study aims to delineate and to examine the policy tools employed by the government in HSP and the development and performance of its industry clusters. Through a systematic review and a strategic position analysis of the industry clusters within HSP, we hope to provide new prospective and policy recommenda- tions for sustaining the competitive advantages of HSP in the next stage. …

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