Growth, Disintegration, and Decentralization: The Construction of Taiwan's Industrial Networks

Abstract

Manufacturing based on networks of small family firms is widely regarded to have been integral to Taiwan's development success. Many studies discuss the social embeddedness, flexibility, efficiency, and competitive advantage of these networks, but there have been few systematic attempts to theorize their origins. A processual analysis of the changing spatial structure of Taiwan's industry, in its social, political, and historical contexts, reveals that Taiwan's concentrated industries of the 1950s did not disintegrate into smaller firms. Rather, there was a proliferation of new rural firms after the mid-1960s. The construction of a disintegrated, decentralized, and networked structure was driven by the contingent actions of rural household entrepreneurs, pursuing strategies of social reproduction, under circumstances resulting from, among other things, an extensive land-reform program and redistributive agricultural policies. Transactions costs and neo-Weberian authority approaches elucidate important factors, but fail to explain the creation of this new class of petty entrepreneurs, and how the conditions of their entrance shaped the networked form of organization they created. Furthermore, their actions did not result from state-led development policies as much as they were the unintended consequences of state policies, preceding by several years government efforts to support the growth of small firms and rural industry. Finally, urban-push explanations assume a passive countryside, thus ignoring the ways rural actors energetically created new structures of production out of the resources at hand.