Behavior, Performance and Policy Effectiveness: Lessons from Taiwan's Steel Industry

Abstract

In the evolution of the Taiwanese steel industry, the behavior of steel firms – both in the micro-perspective of firm-level behavior and in the macro-perspective of industry-level behavior – has played a complicated role in ensuring the effectiveness of the government's industrial policies. Using a hybrid method in the context of the Taiwanese steel industry during 1970 – 1996, this study aims to explore the ‘black box’ of how policy measures engender influences on the two levels of behavior and consequently on firm performance. The firm-level survey not only shows that steel firms dynamically adjusted both their strategic capabilities internally and their competitive conduct externally in response to industrial evolution but also confirms the linkages between firms’ attitudes toward policy measures and their behavior patterns, which lead to performance differentials within a specific period of time. The results of the industry-level analysis indicate that the collective production behavior in the sample period is influenced by policy measures through the productive resources exploited by the industry.