The uniqueness of Taiwan's industrialization is that small and medium-sized enterprises (SMEs) had been the major contributors to exports. What has been responsible for the success of the SMEs? How far and in what ways did the state contribute to their success: can it be attributed to the government's industrial policy? The statist account of Taiwan's development, a dominant approach to explain its economic growth, is weak in answering these questions. This article argues that the existence of a unique industrial structure was key in the explanation of Taiwan's SME-led exports. The industrial structure was basically a consequence of the state's political strategies that determined its public policy towards the private sector. It argues that the market rather than industrial policy was the explanation of the industrial success of SMEs; the economic bureaucracy was a world of politics rather than a range of monolithic institutions; and strongman tactics rather than institutions were the source of state steering capacity and were responsible for the success of industrial policy. It concludes that Taiwan's development was a “politically inspired industrial success” rather than a state-led development.
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