to Korea; the governments of India and Vietnam have tried to tap their overseas "human resources on deposit" in the United States as well. But no one has done this as effectively as Taiwan, nor has anyone else created such a favorable environment for entrepreneurial activity as has Taiwan. The ability to take advantage of its cultural idiosyncrasies is a critical factor in the success of Taiwan's business and government strategies for computers, and the network of personal connections can be seen as the "invisible hand" behind Taiwan's computer industry.
Taiwan's success in computer production can be explained primarily as a result of private sector initiative supported by government efforts to develop capabilities and resources lacking in Taiwan's SME-dominated industry structure. Taiwan also was fortunate that the PC revolution created an international industry structure that lowered entry barriers to the computer industry and presented opportunities for small players to participate in the industry's global production system. Conversely, U.S. companies were fortunate to find such a source of low-cost suppliers, allowing them to avoid the dependence on Japanese suppliers that had been so costly to the consumer electronics industry. This convergence of interests has been generally beneficial to both the United States and Taiwan, although there have been winners and losers at the company level.
One key to Taiwan's success has been an industry structure consisting of a large number of highly focused companies that together make up a broad and deep industry cluster for the PC industry. Those companies not only move quickly on their own, but the network structure of industrial relations also allows for rapid coordination among companies to respond to new market opportunities. Another key success factor has been the breadth and dynamism of Taiwan's global linkages. Access to information, technology, and overseas markets through the web of personal, company, and multinational connections has given Taiwan a tremendous advantage in the PC industry. Finally, the role of government industrial policy in stimulating and coordinating private sector efforts has been vital to Taiwan's success.
Ultimately, both business and government strategy have depended on the web of personal relationships that make it much easier for companies to work together and with government than is the case in most countries. The fact that these connections extend far beyond the borders of the small island of Taiwan is especially important in helping Taiwan integrate into the global PC production network and avoid the isolation that has plagued the Japanese and Korean PC industries.
Taiwan's ability to compete in computers has been exceptional at both the company and country level, but like the other Asian NIES, the country faces continuing challenges as it tries to sustain its momentum in the industry. The shift of labor-intensive production offshore has helped Taiwanese companies stay competitive in the most cost sensitive market segments, such as