But as these policies have receded in recent years, lowered trade barriers have forced manufacturers to face vigorous competition domestically and to seek markets overseas. Taiwan's policies differ from those of some other Asian countries in another important way. The Taiwanese legal system puts relatively few obstacles in the way of bankruptcy. This encourages investors, lenders, workers and managers to act prudently, because they know that the consequehces of bad decisions may be fatal for them. It has also made entrepreneurs accustomed to starting again after their ventures collapse.
Failure is no sin.
Manufacturers appear to shape their strategies in response to these pressures. In particular, many Taiwanese compannies deliberately seek to minimise irretrievable expenses or, as economists call them, sunk costs. Firms tend to cluster in less capital-intensive industries and to subcontract the production of many of their components. That means they do not need to spend much on fixed assets such as machinery, which, in any case, can easily be sold off to rivals if a firm goes out of business. Many Taiwanese companies have also chosen to be suppliers for other firms, often in America or Japan, rather than developing brands of their own.