In contrast, the remarkable growth of specialized yet flexible computer and semiconductor firms in Taiwan has been supported by a very different type of industrial policy. The government provides technological support for both long-term development and specific innovative products, but it has exercised extreme restraint in the allocation of capital and sponsored the development of a thriving venture capital industry. Some industries, however, have proved resistant to the ITRI model. A prime example is hard disk drives.
Hard disks combine high barriers to entry and brutally short product cycles.
Moreover, they lack the stable architecture underlying notebook computers or monitors. Even with help from ITRI, Taiwan's small firms proved unable to keep up with the rapid development and growing economies of scale in hard disks. Not withstanding the limitations revealed by the hard disk case, Taiwan's ITRI model is likely to attract increasing attention from developing countries that recognize the dangers of the Korean approach, yet hope to improve their standing in the international division of labor. All rights reserved.