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The origins and dynamics of Taiwan’s R&D consortia

The origins and dynamics of Taiwan’s R&D consortia

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Research Policy 31 (2002) 633\u2013651
The origins and dynamics of Taiwan\u2019s R&D consortia
John A. Mathews\u2217
Macquarie Graduate School of Management, Macquarie University, Sydney, NSW 2109, Australia
Received 21 December 2000 ; received in revised form 21 March 2001 ; accepted 21 May 2001

A series of collaborative R&D ventures have emerged in Taiwan, within a quite distinctive institutional framework. Unlike the case of many of the collaborative arrangements between established \ufb01rms in the US, Europe or Japan, where mutual risk reduction is frequently the driving in\ufb02uence, in the case of Taiwan it is technological learning, upgrading and catch-up industry creation that is the object of the collaborative exercises. The Taiwan R&D alliances were formed hesitantly in the 1980s, but have \ufb02ourished in the 1990s as institutional forms have been found which encourage \ufb01rms to cooperate in raising their technological levels. Several alliances could be counted in Taiwan in the late 1990s, bringing together \ufb01rms, and public sector research institutes, with the added organizational input of trade associations, and catalytic \ufb01nancial assistance from government. The article discusses the evolving organizational architecture of these R&D alliances, utilizing several case studies, and seeks to draw comparisons between these institutional innovations in Taiwan and established collaborative arrangements in the USA, Japan and Europe. \u00a9 2002 Elsevier Science B.V. All rights reserved.

Keywords:R&D consortia; R&D collaboration; Taiwan; Industrial upgrading; Technology diffusion and adaptation; State-business relations;
Economic learning; Institutional innovation and evolution
1. Introduction

As the costs and risks of research and development mount, so \ufb01rms in the industrial heartlands of the USA, Europe and Japan have sought new organizational forms to reduce and share these risks. Inter-\ufb01rm R&D collaborative alliances and consortia have \ufb02ourished, and with them new institutional foundations and facil- itative mechanisms have been discovered (Evan and Olk, 1990; Kleinknecht and Reijnen, 1992; Dodgson, 1993; Aldrich and Sasaki, 1995; Sakakibara, 1997a,b; Dodgson, 2000). The common feature shared by all such partnerships is that they in\ufb02uence the dynamics of innovation in such a way that the future com-

\u2217Tel.:+612-9850-6082; fax:+612-9850-9942;
E-mail address:john.mathews@mq.edu.au (J.A. Mathews).

petitive position of at least one of the partners, and potentially of all the partners, is improved. The micro- electronics, semiconductor and computer sectors have been in the forefront of these developments, driven by the Schumpeterian competitive dynamics of rapid product turnover and diminishing process technology life cycles that characterize these sectors. Govern- ments have played key roles in the successful R&D consortia in all the advanced countries\u2014as in the case of Sematech in the USA, in the VLSI and many other joint R&D programs in Japan, and in ESPRIT, EUREKA and other collaborative programs in Europe. Public policies towards the framing of such consortia are becoming more favorable (Martin, 1996). These developments, whether they be called R&D alliances, R&D consortia or strategic technology partnerships, or simply collaborative innovation networks, are the subject of a growing scholarly literature (Levy and

0048-7333/02/$ \u2013 see front matter \u00a9 2002 Elsevier Science B.V. All rights reserved.
PII: S0048-7333(01)00131-7
J.A. Mathews / Research Policy 31 (2002) 633\u2013651
Samuels, 1991; Hagedoorn, 1996; Vonortas, 1997;
Hagedoorn et al., 2000).

Of great interest in this regard is the series of collaborative R&D ventures that have emerged in Taiwan, within a distinctive institutional framework. Unlike the case of many of the collaborative arrange- ments between established \ufb01rms in the US, Europe or Japan, where mutual risk reduction is frequently the driving in\ufb02uence, in the case of Taiwan it is techno- logical learning, upgrading and catch-up industry cre- ation that is the object of the collaborative exercises. Taiwan\u2019s R&D consortia were formed hesitantly in the 1980s, but \ufb02ourished in the 1990s as institutional forms were found which encourage \ufb01rms to cooperate in raising their technological levels to the point where they can compete successfully in advanced technology industries. Many of these alliances or consortia are in the information technology sectors, covering personal computers, work stations, multiprocessors and multi- media, as well as a range of consumer products and telecommunications and data switching systems and products. But they have also emerged in other sectors such as automotive engines, motor cycles, electric vehicles, and now in the services and \ufb01nancial sector as well. Several such alliances could be counted in Taiwan in the late 1990s, bringing together \ufb01rms, and public sector research institutes, with the added or- ganizational input of trade associations, and catalytic \ufb01nancial assistance from government. The alliances form an essential component of Taiwan\u2019s national system of innovation (Lin, 1994; Hou and Gee, 1993).

Taiwan\u2019s high technology industrial success rests on a capacity to leverage resources and pursue a strat- egy of rapid catch-up. Its \ufb01rms tap into advanced mar- kets through various forms of contract manufacturing, and are able to leverage new levels of technological capability from these arrangements. This is an ad- vanced form of \u201ctechnological learning\u201d, in which the most signi\ufb01cant players have not been giant \ufb01rms (as in Japan or Korea), but small and medium-sized enter- prises whose entrepreneurial \ufb02exibility and adaptabil- ity have been the key to their success. Underpinning this success are the efforts of public sector research and development institutes, such as Taiwan\u2019s Indus- trial Technology Research Institute (ITRI). Since its founding in 1973 ITRI and its laboratories have acted as a prime vehicle for the leveraging of advanced tech- nologies from abroad, and for their rapid diffusion or

dissemination to Taiwan\u2019s \ufb01rms (Lin, 1994; Hobday, 1995; Wong, 1995; Mathews, 1997; Mathews and Cho, 2000). This cooperation between public and private sectors, to overcome the scale disadvantages of Taiwan\u2019s small \ufb01rms, is a characteristic feature of the country\u2019s technological upgrading strategies, and the creation of new high technology sectors such as semiconductors.

It is Taiwan\u2019s distinctive R&D consortia that demonstrate most clearly the power of this public\u2013 private cooperation, in one successful industry inter- vention after another. Taiwan\u2019s current dominance of mobile (laptop) PCs for example, rests at least in part on a public\u2013private sector led consortium that rushed a product to world markets in 1991. Taiwan\u2019s strong performance in communications products such as data switches, which are used in PC networks, similarly rests on a consortium which worked with Taiwan\u2019s public sector industry research organization, ITRI, to produce a switch to match the Ethernet stan- dard, in 1992/1993. When IBM introduced a new PC based on its PowerPC microprocessor, in June 1995, Taiwan \ufb01rms exhibited a range of computing prod- ucts based on the same processor just one day later. Again this achievement rested on a carefully nurtured R&D consortium involving both IBM and Motorola, joint developers of the PowerPC microiprocessor, as external parties (Mathews and Poon, 1995). Taiwan is emerging as a player in the automotive industry, particularly in the expanding China market, driven by its development of a 1.2 l four-valve engine. Again, this is the product of a public\u2013private collaborative research endeavor involving three companies, which have now jointly created the Taiwan Engine Company to produce the product. Thus, the R&D consortium is an inter\ufb01rm organizational form that Taiwan has adapted to its own purposes as a vehicle for catch-up industry creation and technological upgrading. The microdynamics of the operation of these alliances or consortia, is therefore a matter of some substantial interest.

Some of these consortia have been more successful than others\u2014but all seem to have learned organiza- tional lessons from the early cases where government contributed all the funds, and research tasks were formulated in generic and overly ambitious terms for the companies to take advantage of them (Weiss and Mathews, 1994). The more recent R&D alliances

J.A. Mathews / Research Policy 31 (2002) 633\u2013651

formed in the 1990s have been more focused, more tightly organized and managed, and have involved participant \ufb01rms much more directly in co-developing a core technology or new technological standard which can be incorporated by the companies, through adoption and adaptation, in their own products.

The basic model of the Taiwanese alliances is the construction of a process in which R&D costs can be shared, and risks reduced, through bringing many small \ufb01rms into a collaborative alliance with each other and with ITRI (i.e. with one its operating lab- oratories). It is ITRI which provides the anchor for the alliance and the principal vehicle of technology leverage. Thus, the Taiwan R&D alliances are similar to their counterparts in North America, Europe and Japan in their reliance on public sector laboratories to provide the core institutional vehicle for R&D coop- eration (Rush et al., 1996; Dodgson, 1997). But they differ from their counterparts in the Triad countries in that their goal israpid adoption of new techno- logical standards, products or processes developed elsewhere, and theirrapid diffusion to as many \ufb01rms as possible\u2014rather than extending the envelope of R&D (Freeman and Hagedoorn, 1994). The organiza- tional form of the Taiwan alliances has evolved over the course of the two decades in the 1980s and 1990s. It owes much to the R&D collaborative vehicles developed in the leading industrial centers, particu- larly in the way that Japan structured many relatively short-lived R&D alliances with clear technological learning goals which in turn drew on earlier Euro- pean examples (Sigurdson, 1998, 1986; Fransman, 1990/1992; Sakakibara, 1997a; Sakakibara, 1993). Taiwan\u2019s ability to fashion these consortia, and uti- lize them to accelerate technological catch-up and learning, is testament to the country\u2019s institutional capacity. The initiative for the formation of early alliances came exclusively from the public agencies (largely ITRI or the Ministry of Economic Affairs), but the private sector has been taking an increasingly active role as the institutional form of the consortia has evolved, to the point where private \ufb01rms were taking the initiative in forming alliances by the end of the 1990s (as in the case of electronic commerce). Thus, the Taiwan R&D consortia pose an interesting case for the study of government-business relations and their evolution as an economy moves through phases of technological imitation to innovation.

It should be pointed out that not all East Asian coun- tries have been successful in forming research partner- ships, despite overwhelming evidence of their ef\ufb01cacy in the case of Japan\u2019s catch-up efforts in the 1960s and 1970s. They have been tried without great success in Korea, while there have been few efforts to utilize them in countries which have relied more heavily on multinational investment, such as Singapore, Malaysia and Thailand. In this sense, the Taiwan consortia rep- resent a singular experience outside the scope of the established collaborative arrangements in Japan, the USA and Europe.

This article is based on a study of 20 of Taiwan\u2019s R&D alliances formed over the course of the past 15 years.1Since these consortia are not well known, several representative case studies are given in the paper, each framed around a discussion of the ratio- nale for the formation of the alliance, its organization, composition and processes, outcomes, and an assess- ment of its relative success.2The cases are then compared with what is known of successful R&D col- laborative ventures in the USA, Europe and Japan, in order to draw out the key features of the Taiwan R&D alliances. The aim is to develop an evolutionary con- ception of their organizational design, providing an assessment in general of their effectiveness andmodus


The alliances studied, and the representative cases, are displayed in Table 1, which illustrates the range of consortia formed. It can be seen that they span many industries and target technologies, and that they range

1This study of Taiwan\u2019s R&D alliances has been conducted

through \ufb01eld work carried out in November 1994, September 1995, August 1996 and March 1997. Financial assistance has been pro- vided by the Australian Research Council, and by the Business Networks research program of the Department of Industry, Science and Technology (in 1995\u20131996). Research assistance was pro- vided by Teresa Shuk-ching Poon and Cathy Xu; some interviews were conducted in conjunction with Professor Linda Weiss, Dr. Wan-wen Chu and Dr. Shin-horng Chen. The assistance of of\ufb01cers at the Industrial Technology Research Institute (ITRI), in particular Dr. Otto Lin (former president), Dr. Chintay Shih (current pres- ident) and Dr. Paul Bao-shiu Lin (deputy director of CCL), is gratefully acknowledged.

2The cases studied provide a substantially representative sample,

but certainly not the entire class of R&D consortia with which ITRI has been involved, nor the still wider class of consortia initiated by the private sector without ITRI involvement. Further studies are needed to gain this more complete perspective on the Taiwan experience.

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