Southeast Asian Studies, Vol. 23, No.1, June 1985

A Commentary on Shoichi Ito's "Japanese Management in Taiwan"
Chi SCHIVE*

A paper with broad coverage like this canwere satisfied with their experiences.

TheseI have chosen issues

findings paint a somewhat brighter picturethat suit my own interests and offer thethan the gloomy view held by the public infollowing comments to stimulate furtherTaiwan.

discussion.

From the survey results, the author concludes that Chinese are practical and indi-1.

vidualistic.

serve many purposes.

Did Japanese Firms Transfer Technology?

The most interesting and important part of

It may be generally agreed that

this is the common Chinese behavior in daily

this study is sections IV and V, which dealbusiness practice.

The author believes thatwith the practice of management of Japanesesome of his findings are inconsistent with thissubsidiaries in Taiwan and local middle

view of Chinese character.

For instance,

Many subjects

if local middle managers are practical andcan be addressed from the data presented.

individualistic, the author asks why they care

For example, it will be of great interest toabout their subordinates.

investigate further why the general public's
feeling about the performance of Japanesefirms on technology transfer in Taiwan is notseveral explanations. First, to be individualistic does not necessarily imply that avery good.

people.

managers' responses thereto.

This study shows, however, that

There seem to beperson tends to be mean or ignore otherFor the very "practical" reason ofJapanese subsidiaries in Taiwan send a higher

having a job done well, it is important to care

percentage of local managers abroad fortraining than do Japanese subsidiaries inabout subordinates. It is one way of building
up good personal relationships. Another

Furthermore, 57.1 % ofexample is the finding that local middle

local middle managers agreed that Japanesemanagers thought their companies had good

staff are willing to transfer new technology or

reputations but were not proud of working

management know-how through on-the-job
training. This percentage figure is also higher

for their companies. But to say a company
has a good reputation - - it is not specified

than those for ASEAN countries other than
the Philippines. Another indicator is thatfor what - - may simply reflect a majority
opinion; to say whether you like it or not is athe local middle managers who went toJapanese companies to learn new technology

personal question.

ASEAN countries.

* Graduate Institute of Economics, National
Taiwan University, Hsu Chow Road, Taipei,
Taiwan116

2.

The Economy and Labor Market of Taiwan

Given that labor productivity in Taiwan
has increased at a higher rate even than realChi SCHIVE:

A Commentary on Shoichi Ito's "Japanese Management in Taiwan"

wages from 1976 to 1982, one would expect

investment in Taiwan before 1965 was oriented

that either the quality of labor in Taiwan wasvery much to the domestic market and hencehigh or the raise of nominal wages represented

was confined to the form of joint-ventures forno threat to foreign investors.

It also implies

which the foreign share was restricted.

It wasthat established foreign firms must themselves

after 1965 that the first export processing zones

have contributed to the general improvement

were established.

of labor productivity during that period.

a large amount of Japanese investment, andThus, to say that "foreign subsidiaries ...may

Japanese companies in the zones were com-be forced to change their strategies in thepletely export-oriented and permitted to benear future" misses the essence of the recent

wholly foreign-owned.

development in Taiwan's labor market.
There are several other suggestions to theThe EPZs have attracted

Table 1 presents the equity share structureof Japanese subsidiaries in the sample.

Theauthor.

result is biased toward majority-owned Japa-1)

nese firms compared with that of the survey

The correct figures for average annual

economic growth rates between 1963 andmade by the Investment Commission.

1972 and between 1973 and 1982 seem to besampling bias will have a bearing on the10.8 % and 7.8 %, respectively, rather than theinterpretation of results.

20.1 % and 10.4% given in the original paper.

structure from the Investment Commission2)

Concerning the finding, cited from Liu'sThis

Data on ownershipsurvey should be added to Table 1.

article, that "labor mobility is increasing

The claim that "there are not enough(during 1975 to 1979)," it should be clearly

qualified personnel for technology transfer"stated that no long-term inference should bedrawn from it. The year 1975 marked thebecause of "the difficulties of hiring andkeeping college graduates" does not seem toend of a recession, when a low mobility would
be expected; but 1979 was a peak year, whenbe supported well by the findings of thesurvey. First, if the reason for difficulty ina relatively high turnover would be the case.

recruiting and retraining college graduates,

The author did not distinguish clearlyas suggested by the author, is that "Japanese

between "export processing zone" and "freesubsidiaries are mainly production bases for

trade zone" in the paper.

These two terms

their mother companies in Japan," then it

have different meanings.

Although Taiwan

must be the scope or essence of decision-

may have been the first country to set up

making on production that has determined theexport processing zones in East Asia, sheprobably did not initiate this system.

educational level and quality of employees tobe hired and the kinds of technology to be3.

transferred. Second, even if there is notmuch technology to transfer in the narrow

3)

Japanese Subsidiaries in Taiwan

The statement that: "at the early stage ofsense, the survey showed that the knowledge orJapanese direct investment in the 1960s,

know-how about production management andforeign equity share was rather free but isquality control was evaluated highly by local

now restricted," may not be true.

middle managers.

ForeignThird, as was pointed out
117before, Japanese subsidiaries in Taiwan appear

Kong and Korea.

to have performed better in trying to train

The lower overtime compensation paid byemployees than those in ASEAN countries.

Japanese firms in Taiwan than ASEAN

They seem to be earnest at least in trying tocountries may be due to the different legaltransfer technology.

requirements in different countries.

4.

factor may be that, as the survey findings
have shown, bonuses in terms of monthly

The Management of Japanese Subsidiaries

AnotherThe finding that Japanese firms in Taiwan

salaries are higher in Taiwan than in ASEAN
countries.

have a higher proportion of Japanese super-It may be surprising to notice that Japanesevisors but a lower proportion of Japanesesubsidiaries in Taiwan tend to provide fewer

managers

inintra-firm welfare facilities, compared withThe author

local firms as well as Japanese joint-venturesin Taiwan

thanJapanesesubsidiaries

ASEAN countries is interesting.

suggests that localization on the production

in ASEAN countries.

line level progresses more slowly in Taiwan

attributable to two facts: a) there is a com-than in ASEAN countries. This suggestion ispuzzling in view of the significant development

pulsory health insurance in Taiwan, which
may not exist in some ASEAN countries; b)

gap between Taiwan and ASEAN countries

a large proportion of Japanese companies areother than Singapore. The difference may becaused by differences in the industrial struc-

located in EPZs where public dormitories,

ture, the degree of commodity diversificationin kinds and quality.

An interesting com-

parison may be with the experiences in Hong118

This finding may beclinics and sport facilities are well provided,so that it is not necessary for them to duplicate
the facilities.