提升台灣競爭力：加台資訊科技產業合作 - 政大學術集成

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(1)國立政治大學亞太研究英語碩士學位學程 International Master’s Program in Asia-Pacific Studies College of Social Sciences National Chengchi University 碩士論文 Master’s Thesis. 立. 政治大. ‧ 國. 學 ‧. 提升台灣競爭力：加台資訊科技產業合作. sit. y. Nat. Enhancing Taiwan’s Competitiveness through Canada-. n. al. er. io. Taiwan ICT Industry Cooperation. Ch. engchi. i n U. v. Student: Ashley Stead Advisor: Professor Alex Chiang. 中華民國. 2016 年 10 月. October 2016.

(2) 提升台灣競爭力：加台資訊科技產業合作 Enhancing Taiwan’s Competitiveness through CanadaTaiwan ICT Industry Cooperation. 研究生：李艾. Student: Ashley Stead. 指導教授：姜家雄. Advisor: Professor Alex Chiang. 立. 政治大國立政治大學. ‧ 國. 學. 亞太研究英語碩士學位學程. Nat A Thesis. al. er. io. sit. y. ‧. 碩士論文. n. v i n C h Master’sUProgram in Asia-Pacific Submitted to International engchi Studies National Chengchi University In partial fulfillment of the Requirement For the degree of Master in China Studies 中華民國. 2016 年. October 2016. 10 月.

(3) Acknowledgements. This thesis was made possible with the guidance, mentorship and comments from advisor Professor Alex Chiang (姜家雄) of the Department of Diplomacy at National Chengchi University. Support and guidance from committee members Professor Jack Wu (吳文傑) of the Department of Public Finance at the National Chengchi University and Professor Eric Chiou (邱奕宏) of National Chiao Tung University provided this thesis with valuable input for the quality and completion of. 政治大. this thesis. Brandon Geithner of the Canadian Trade Office in Taipei and Kim Roberts. 立. of Ciena Corporation were also important contributors by taking time out of their. ‧ 國. 學. busy schedules to allow for insight into their organizations.. I would like to thank my parents, Karen and Richard Stead, for their. ‧. unconditional support and encouragement throughout all of my education, the IMAS. Nat. sit. y. program and the writing of this thesis. Their strength, confidence and drive to live,. n. al. er. io. learn and be creative have provided me with excellent role models to follow my. i n U. v. dreams and challenge myself with new goals. Also, my partner, Eli Thys, and best. Ch. engchi. friend, Marie-Claude Poulin, for their continued motivation and inspiration to continue to learn, grow and work hard. Finally, to my classmates from different corners of the world from whom I have learned a great amount from.. i.

(4) Abstract Taiwan is an established contract hub for the manufacturing of information and communication technologies (ICT). As Canada aims to promote innovation in its ICT industry and as a major trading partner and collaborator with Taiwan, there is opportunity for both countries to increase cooperation in this industry. This thesis will assess the current level of cooperation between the two countries’ ICT industries, ICT. 政治大 can maintain its ICT competitiveness through enhanced Canada-Taiwan 立 companies and governments. The purpose is to determine how Taiwan. ICT industry cooperation. The following research question will be. ‧ 國. 學. analyzed: How can enhanced ICT cooperation and collaboration in. ‧. research and development between Canada and Taiwan improve. sit. y. Nat. innovation in Taiwan’s ICT industry in order to remain competitive? The. io. er. thesis will use a qualitative analysis of both industries to determine strengths and weaknesses. Current cooperation in bilateral relations. al. n. v i n C h Findings demonstrate between them will be examined. that Canada and engchi U Taiwan have complementary ICT industries for partnerships and strong foundations which can promote further cooperation, research and development, and bolster innovation. Strong government level and company level cooperation will enhance Taiwan’s ICT competitiveness by creating new products, services and technologies.. ii.

(5) Table of Contents Motivations...................................................................................................... 3. 1.2. Objectives ........................................................................................................ 4. 1.3. Definitions and Scope ..................................................................................... 4. 1.4. Operationalization ........................................................................................... 5. 1.5. Theory ............................................................................................................. 6. 1.6. Structure .......................................................................................................... 9. Literature Review ................................................................................................. 11 Analysis of Taiwan’s ICT Industry ....................................................................... 15. 政治大. 3.1. Taiwan’s ICT Industry Evolution and Competitiveness ............................... 15. 3.2. Technological Infrastructure and Education of Taiwan ................................ 24. 3.3. Taiwan’s International Trade ........................................................................ 30. 3.4. ICT-Related Policies in Taiwan .................................................................... 31. 3.5. ICT Patents Granted in Taiwan ..................................................................... 33. 立. 學. ‧. Analysis of Canada’s ICT Industry ...................................................................... 34. y. Nat. Canada’s ICT Industry Evolution and Competitiveness ............................... 34. 4.2. Technological Infrastructure and Education ................................................. 37. 4.3. Canada’s International Trade and Investment ............................................... 43. 4.4. ICT-Related Policies in Canada .................................................................... 44. 4.5. ICT Patents Granted in Canada ..................................................................... 45. io. 4.1. sit. 4. 1.1. n. al. er. 2 3. Introduction .............................................................................................................. 1. ‧ 國. 1. 5. Ch. engchi. i n U. v. Intergovernmental Cooperation between Taiwan and Canada ............................. 46 5.1 Trade and Investment between Taiwan and Canada .......................................... 48 5.2 The Role of Trade Offices in Promoting ICT Cooperation ............................... 53 5.3 Cooperation Results of Canadian Wearable Tech Companies........................... 56. 6. Taiwan and Canada Company Level Cooperation ............................................... 58 6.1 Compal Communications, Inc. (Taiwan) & Wavesat (Canada) ......................... 59 6.2 Quanta Computer, Inc. (Taiwan) & Intrinsyc Software International, Inc. (Canada) ................................................................................................................... 60 6.3 Tatung Infocomm (Taiwan) & Bridgewater Systems (Canada) ........................ 61 iii.

(6) 6.4 Foxconn Technology Group (Taiwan) & SMART Technologies Inc. (Canada) .................................................................................................................................. 61 6.5 Laipac Technology Incorporated (Canada) ........................................................ 62 6.6 Taiwan and Canada’s Position on the ICT Global Value Chain ........................ 63. 7.1. Canada and Taiwan’s ICT Industry: Strengths and Opportunities ............... 65. 7.2. Government Level Cooperation between Taiwan and Canada ..................... 66. 7.3. Industry Level Cooperation between Taiwan and Canada ............................ 68. 7.4. Taiwanese and Canadian Company Level Cooperation ............................... 69. 7.5. Limitations and Further Research ................................................................. 71. 政治大. Conclusions .......................................................................................................... 72. 立. 學 ‧. io. sit. y. Nat. n. al. er. 8. Findings ................................................................................................................ 65. ‧ 國. 7. Ch. engchi. iv. i n U. v.

(7) List of Figures. Figure 9. ‧. Figure 21 Figure 22 Figure 23. 學. Figure 20. al. n. Figure 19. Canada, 1992 and 2008 …………………………………………….39 ICT Employment in Services and Manufacturing (2000-2009) ….40 World Leaders in ICT-Related Patents …………………………….46 Main Taiwan Exports and Imports with Canada ………………….49 Canada’s Trade Specialization Index Correlations with TPP Economies and Taiwan, 2002 ………………………………………………….50 Computer and Electronic Product Manufacturing Trade Balance (Canada-Taiwan) in Thousands USD …………………………….51 Computer and Electronic Product Manufacturing Trade Balance (Taiwan-Canada) in Thousands USD …………………………….52. io. Figure 15 Figure 16 Figure 17 Figure 18. Nat. Figure 10 Figure 11 Figure 12 Figure 13 Figure 14. 立. Employed Persons in ICT Services-Producing Industry (Thousands) ……………………………………………………….25 R&D expenditure by the sector of performance, 1990-2003 ……….29 ICT Sector and All Other Industries Growth 2002-2011 ……….35 Share of ICT Sector in Total GDP, Selected Countries – 2008 ….36 Canada’s Global Competitiveness Index ……………………….37 Distribution of international and Canadian students, by field of study,. y. Figure 8. 政治大. sit. Figure 7. 2015………………………………………………………………….20 ICT Products in Which Taiwan Holds the Highest Global Market Share (by production value) ……………………………………….21 Taiwan’s Global Competitiveness Index …………………………….24. er. Figure 4 Figure 5 Figure 6. Historical Chart of Taiwan’s Manufacturing Output Composition ….16 Transformation of Taiwanese Industry …………………………….17 ICT Industry Percentage in terms of Contribution to Taiwan’s GDP 2000 – 2012 ……………………………………………………….18 Taiwanese IT Hardware Industry Shipment Value, 2004 – 2014 ….19 Taiwanese Data Communications Shipment Value, 2002 – 2014 ….19 Taiwanese Semiconductor Industry to Maintain Steady Growth in. ‧ 國. Figure 1 Figure 2 Figure 3. Ch. engchi. i n U. v. Canada and Taiwan’s Foreign Direct Investment ………………….53 Compal Corporation, Inc.’s Stock Value (2007-2016) …………….59 Quanta Computer Inc. Stock Value (TPE: 2382) 2005-2016 ……….60. v.

(8) List of Tables Development of the Manufacturing Industry in 2012 ……………25 Country statistics: Averages for 5- and 30-year periods (utility patent only) ………………………………………………………34. 立. 政治大. 學 ‧. ‧ 國 io. sit. y. Nat. n. al. er. Table 1 Table 2. Ch. engchi. vi. i n U. v.

(9) 1 Introduction Taiwan is an emerging market with a developed high-technology manufacturing industry and significant export capacity. Taiwan’s information and communication technology (ICT) industry makes up a third of the economy’s gross domestic product (GDP) and has been a high-technology contract hub for the international market. Through the second half of the 20th. 政治大 a major part of its economic growth strategy. As a leader in notebook computer and 立. century, the Taiwanese government supported and drove the advancement of technologies as. ‧ 國. 學. motherboard producers, it has been one of the major providers for several important ICT products since the 1980s and the 1990s.. ‧. In an increasingly competitive global market for high-technology products, Taiwan’s. sit. y. Nat. government is encouraging innovation in its ICT industry with increases in research and. io. er. development funding for ICT research institutes, universities and firms in order to decrease. al. v i n C technology products which allows it tohhave e na competitive g c h i Uadvantage and provides n. its reliance on export profitability. Taiwan has been the global manufacturing hub of high-. opportunity for the established industry to move into higher value-added manufacturing. Favourable investment and trade opportunities are available through its many science-based industrial parks, industrial zones, and export processing zones. Its largest science-based industrial park, Hsinchu Science and Industrial Park, is an example of Taiwan’s entrepreneurship and innovation. This park has high collaboration with Silicon Valley in the sharing of knowledge, ideas and technologies between its specialist producers and technical communities which underscores the significance of global high-technology communities and their institutions in knowledge and technology transfer. 1.

(10) Facing increased international competition, Taiwan will come under increasing pressure to move into higher value-added manufacturing and service sectors. Taiwanese firms benefit from having many years of experience in key component and high-end software research and development (R&D) and production, which gives them a significant competitive advantage. Taiwan is very susceptible to external influences and shocks as it closely depends on export profitability, so needs to move towards improvement in and application of R&D. Without major reforms, its current economic model could prove to be ineffective, and suffer a falling standard of living for its population of 23 million. Many wonder whether the economy will be. 政治大 Canada has an established ICT industry which offers a competitive advantage through 立. able to continue to promote economic growth.. its level of knowledge, technical and entrepreneurial capabilities. With its many universities,. ‧ 國. 學. research parks and start-up companies, Canada’s ICT infrastructure also offers opportunities. ‧. for the future of the industry through research and development, and innovation. A change in. sit. y. Nat. the Canadian government in 2015 also provides an opportunity to create new policies and. io. er. stimulus in order to support further growth in the ICT industry. Canada and Taiwan cooperate in many platforms including agreements and meetings between their respective trade offices,. al. n. v i n universities and ICT companies. AsC these two economies U h e n g c h i could benefit from further. encouragement to innovate in these sectors, further cooperation could be beneficial to both countries. As an emerging market and a significant industrial global manufacturing outlet of hightechnology products, there is an opportunity for Taiwan to increase its partnership and collaboration with its trading partners. As a trading partner and existing collaborator with Taiwan’s ICT industry, Canada also looks to promote innovation in research and development in this sector. This thesis aims to identify how Taiwan can benefit from further cooperation with the Canadian government and ICT companies. The research question that will be addressed is: How can enhanced ICT cooperation and collaboration in research and 2.

(11) development between Canada and Taiwan improve innovation in Taiwan’s ICT industry in order for Taiwan to remain competitive? By examining this question, Taiwan and Canada’s ICT industry development and competitiveness will be illustrated. Finally, it will suggest the opportunities that Canada and Taiwan have to liberalize bilateral economic relations and cooperate between their ICT industries.. 1.1 Motivations Taiwan’s export-driven economy, low number of signed free trade agreements and lack. 政治大 eroded. From 2000 to 2014, exports decreased by 6.5 percent year-on-year to USD 22.249 立. of ability to move up in the supply chain have led its export competitiveness to become. ‧ 國. 學. billion, mainly from a decrease in ICT related products such as electronic products (-3.4%), information, and communication and audio-video products (-11.4%) (World Bank, 2014).. ‧. Taiwan needs to begin to look outward for partnership in order to gain economies of scale. sit. y. Nat. and drive innovation in its ICT sector.. io. er. By understanding both countries’ strengths, weaknesses and methods in promoting their. al. v i n C h in order to maintain experience and knowledge from each other e n g c h i U their competitiveness. n. ICT industries, Taiwan and Canada can be assessed on areas in which they can gain. Reviewing trends demonstrated by successes in cooperation can support and promote further bilateral cooperation between companies with partnering needs. The ICT industries in Canada and Taiwan are cornerstone industries for both countries which need to act globally to compete and innovate. Identifying the methods in which partnering can lead to successes can provide the pathway for successful businesses and economies. Taiwan and Canada both have comparative advantages in their ICT industries which they have the opportunity to share through cooperation in order to create mutual benefits. Taiwan is a successful hub of manufacturing contract companies while Canada is a leading 3.

(12) software innovator. Both countries have established relations between their governments and ICT industries and measures to push cooperation within their ICT sectors already exist.. 1.2 Objectives The first research objective is to assess the strengths and weaknesses of Taiwan’s and Canada’s ICT industries as well as their relative competitiveness. This will be done by reviewing literature and statistics-based reports on both of these industries. The level of cooperation between Canada and Taiwan in information sharing between their ICT sectors at. 政治大 and companies. This thesis will provide examples of the ways Taiwanese and Canadian 立. a company level will be analyzed through research on partnerships between research facilities. ‧ 國. 學. companies already work together. The nature and amount of bilateral cooperation between Taiwan’s and Canada’s governments in relation to the ICT industry will be examined by. ‧. reviewing bilateral agreements, partnerships and initiatives. Finally, areas of policy that can. sit. y. Nat. be modified to increase economic cooperation between the two economies in regard to. io. er. knowledge and technology sharing will be suggested by identifying methods and areas which. al. n. v i n C h variable of enhancing This thesis projects that the independent ICT cooperation through engchi U. could be improved.. increased mergers and partnerships with Taiwan’s trading partners like Canada is an effective way for the government and ICT companies to stimulate the dependent variables of innovation to enhance Taiwan’s ICT industry competitiveness. Successful existing partnerships suggest that ICT companies will mutually benefit from increased partnership in order to learn from their strengths and gain from their advantages.. 1.3 Definitions and Scope To define the terms proposed in this thesis, enhanced ICT cooperation refers to 4.

(13) increased bilateral agreements and partnerships such as joint ventures and acquisitions. Second, collaboration in research and development is defined as the agreements and projects between companies, research facilities and governing bodies of Taiwan and Canada. Finally, competitiveness is defined as the ability of companies to compete in domestic and global markets, and of countries’ ability to support the development of businesses. Finally, innovation follows the definition outlined by the Oslo Manual as, “the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or. 政治大 combination of manufacturing and services industries, which electronically capture, transmit, 立. external relations” (OECD, 2005, 46). The ICT industry follows the OECD definition as, “the. and display data and information” (OECD, 2002, 81). Innovation can further be defined as a. ‧ 國. 學. fast-paced and new growth industrial segment of the economy which offers ongoing. ‧. introductions of new technology in support and promotion of the information environment.. sit. y. Nat. The scope of this thesis is focused on the bilateral relations and cooperation between Canada. io. al. n. between two nations.. er. and Taiwan. By keeping this study on a smaller scale, the focus is kept on cooperation. Ch. engchi. i n U. v. 1.4 Operationalization In order to fully understand how competitiveness is maintained and enhanced in an industry, it is first important to understand the situation of the industry and cooperation between both countries. To understand Taiwan and Canada’s respective ICT industries, this thesis will provide a qualitative analysis to assess the strengths, weaknesses and competitiveness of both industries. Strengths and weaknesses of the industries will be measured by ICT industry growth, growth in percentage of GDP and number of ICT companies. The level and nature of technological infrastructure and education, trade, policies 5.

(14) and patents in each industry will be assessed to identify successful areas and one’s that need promotion. Technological infrastructure and education will be measured by the effectiveness of research institutes and universities in creating ICT talent through number of students, promoting cooperation through student exchanges and patents granted. Trade will be measured by the percentage and value of ICT exports from each country. Policies will be assessed by the nature and objectives of the policies and measured by their results in promoting ICT industry competitiveness. Finally, patents will be measured by the number and trend of ICT patents granted to each country over time.. 政治大 institutions, universities and companies. Once the industries and their environments are 立 Further, this thesis will illustrate the level of success of research facilities and. understood then the effect of cooperation between Taiwanese and Canadian companies and. ‧ 國. 學. governments will be examined. It will utilize five case studies of current company to. ‧. company cooperation between Taiwan and Canada, focusing on the nature of the partnerships. y. sit. io. er. processes.. Nat. and level of success in returns, R&D and innovation through measuring new technologies and. Interviews were conducted with the Canadian Trade Office in Taipei, Taiwan and contact. al. n. v i n was made with the Taipei EconomicCand Cultural Office inUOttawa, Canada. Contacting these hengchi. offices allowed for insight on cooperation between governments in relation to ICT. This, in. turn, provided an opportunity to speculate where the relationship between both countries can advance. Consultation with companies in the ICT industries will give this thesis insight on their current level of cooperation with Taiwan and support they need from the government in creating partnerships.. 1.5 Theory Raymond Vernon (1966) introduced the Product Cycle Theory to frame the development process which a product goes through in the context of international trade and foreign direct 6.

(15) investment (FDI) which is applicable to most ICT products which go through a global production web. In framing the product cycle, Vernon focuses on the “timing of innovation, the effects of economies of scale and the roles of ignorance and uncertainty in influencing trade patterns” (Vernon, 1996, 190). He argued that any theory on international trade would be incomplete without focusing on the roles of innovation, scale, ignorance and uncertainty. Vernon outlined that enterprises in any advanced country are very dissimilar and they all have equal access to knowledge in the physical, chemical and biological sciences. He did not, however, assume that this equal access to knowledge would lead to equal application of it in. 政治大 industries. It is in this stage that an entrepreneur must intervene by accepting the risks and 立 creating new products which is seen in Taiwan and Canada’s dissimilarities in their ICT. testing new strategies to bridge this gap including trade and FDI.. ‧ 國. 學. An entrepreneur’s consciousness and responsiveness to these opportunities are a. ‧. function of ease of communication which is further determined by geographical proximity.. sit. y. Nat. Domestic producers are much more likely to be aware of local market conditions when. io. er. introducing a new product rather than conditions in a foreign market which benefits countries who cooperate and provide access to their markets. Communication is a key factor in. al. n. v i n C hProximity aids largely innovation of certain kinds of products. in this communication, engchi U. therefore, the first production facility for a new product or improved product will often be in the company’s home country. In the early stages, producers want to be close to manufacturers so they can easily make modifications to their products. Production does not always remain in the home country as the factors of communication and external economies become considered (Vernon, 1966, 192). Geographical proximity can also be created by a company opening a headquarters office close to the manufacturing site if it is abroad. Companies benefit from low transport costs as ICT products are generally small and low weight items. However, Vernon argues that research-oriented and custom-made products remained closer to markets and to the main industrial complexes (Vernon, 1966, 204). This 7.

(16) follows his earlier hypothesis of research heavy products remaining closer to the organizations to benefit from increased communication and ability to easily change inputs. Vernon argues that Taiwan’s foreign-owned electronics plants set up to manufacture and export standard sorting equipment for computers is a unique export-oriented case. He argues that Taiwan and Japan have managed to develop significant overseas markets for standardized manufactured products which is supported by their trade performance (Vernon, 1966, 205). Another related theory is competitive advantage theory coined by Porter (1990) as the. 政治大 success of Taiwan’s and Canada’s ICT industry. He argued that it was better to innovate to 立 capacity that a nation’s industries have to innovate and upgrade which is pertinent to the. overcome local disadvantages rather than to outsource. Further, that it was better to develop. ‧ 國. 學. domestic supplies than rely on foreign produced ones which Taiwan is aiming to do with a. ‧. reduction in imported ICT parts. This is further accelerated by strong domestic competition,. sit. y. Nat. aggressive local suppliers and demanding local customers which must be created in a nation. io. er. if not present. For a nation to succeed it needs to have an environment which is forwardlooking, dynamic and challenging.. al. n. v i n C h competitive advantage Porter argues that companies achieve through acts of innovation engchi U. in new technologies and in ways of doing things. These can include a new product design,. marketing approach, production process or training method. Information is necessary in the process of innovation and improvement, especially information which competitors do not have. When looking beyond national borders, both domestic and international needs must be anticipated in the international market. Cooperation needs to be mutually beneficial to both parties and enhanced communication will allow their needs to be met. Under the competitive advantage model, the role of the government is as a catalyst and challenger to encourage companies to move to higher levels of competitive performance. The government policies which succeed are those that create an environment in which companies 8.

(17) can gain a competitive advantage. Strategies which hinder progress are those that involve government too directly in the process. Since governments generally prefer short-term results, they normally support the short-term benefits of subsidies, protection and arranged mergers which, in turn, hinder innovation as it often takes an industry a decade to create competitive advantage. Competitive advantage is necessary for two countries to have in order to mutually benefit from cooperation. Countries or companies in one country will identify the competitive advantage in other countries or companies whether it be lower labour costs or an innovative. 政治大 competitive advantage of another country or company fits their partnering needs, they will 立 technology that other countries have not developed when looking for partnerships. If the. look to that party to form a partnership with them. This holds true when it comes to Taiwan. ‧ 國. 學. and Canada forming cooperation between their governments or at a company level in their. ‧. ICT industries. Taiwan and Canada have competitive advantage in different areas, Taiwan in. sit. y. Nat. manufacturing and Canada in software production, and this will create a mutually beneficial. io. n. al. er. relationship when partnering.. 1.6 Structure. Ch. engchi. i n U. v. The content of the thesis will begin with an overview of Taiwan and Canada’s separate ICT industries with a focus on their competitiveness, strengths and weaknesses in Section 3 and Section 4 by illustrating an overview of ICT industries, technological infrastructure and education, trade, policies and patents in each country. In Section 5, government level cooperation between the two nation’s ICT industries and economies will be presented. This includes the agreements formed between countries, current bilateral relations including trade and knowledge sharing between companies, and cooperation in multinational organizations. Insight into bilateral relations from information gathered through an interview with the Canadian Trade Office in Taipei (CTOT) and information from the Taipei Economic and 9.

(18) Cultural Office (TECO) in Ottawa will be assessed. This will allow for a further understanding of the current level of cooperation between both countries in bilateral relations. Enhancing competitiveness from cooperation between Canadian and Taiwanese firms and industries will be examined in Section 6 to identify areas and methods of success. The use of case studies of Taiwanese and Canadian joint ventures, outsourcing of manufacturing and an acquisition will be examined to determine the success of cooperation at a company level. Literature on company successes of new technologies and processes, press releases, and yearly trends in company stock value will be used to observe whether these partnerships. 政治大 and Taiwan’s positions on the ICT global value chain will be determined from an example of 立. have increased the competitiveness of Taiwanese companies. Also in this section, Canada’s. an ICT product creation to determine the ways companies work together. This section will. ‧ 國. 學. conclude with the results from a questionnaire given to Canadian wearable technologies start-. ‧. up companies who are seeking partnerships in Taiwan.. sit. y. Nat. All findings from the different sections of the thesis will then be assessed in Section 7. io. er. and conclusions reached in Section 8 of the thesis to assess the changes and level of Taiwanese and Canadian ICT cooperation and competitiveness. It will assess the results of. al. n. v i n C hcompanies, identifying cooperation between governments and the most successful cases of engchi U. joint ventures and other business relations. This will be used to determine whether Taiwan’s ICT firms and industry have become more competitive as a result of increased cooperation with the Canadian ICT industry and individual firms. Future opportunities in cooperation to maintain and increase Taiwanese competitiveness and policy recommendations will be suggested to conclude the thesis.. 10.

(19) 2. Literature Review The growth and impact of ICT industry competitiveness has become a topic increasingly. researched by scholars. Most literature includes scholarly articles, government researched reports and multinational organization reports such as the annual World Economic Forum’s Global Competitiveness Report. ICT industries have largely been measured by the level of productivity, efficiency, profitability, variety and quality. Scholars have studied the productivity growth and business models of both Taiwan’s and Canada’s ICT industry. Much of the literature on Canada and Taiwan’s ICT industries and innovation is focused on. 政治大 compared to assess their relative 立innovation and influence through ICT in the world economy. productivity and growth. Canada and Taiwan, among other countries, have been studied and. ‧ 國. 學. There are macro-level studies including the Taiwanese and Canadian economies which compare many countries’ success in their ICT industries along with micro-level studies which. ‧. compare industries and competitiveness in the world economy. Research related to theory on. sit. y. Nat. economic liberalization and international cooperation also frame these industries and global. n. al. er. io. systems that have been created to deal with supply and demand in markets and sectors.. i n U. v. Wang (1999) examined the impact of the ICT industry on economic growth in Taiwan. Ch. engchi. based on longitudinal data over 16 years. The study focused on the impact of national IT capabilities and national investment on its share of gross domestic product (GDP). He argues that ICT is a global catalyst that offers growth opportunities for newly industrialized economies. Further, the diffusion of ICT throughout all industries has a greater impact than the production and enhancement of the ICT industry alone and is favorable towards economic growth. The study examines the policy measures which can be implemented to stimulate ICT adoption and promote economic growth. Wang’s (1999) findings implied that investment in IT pays off when there is robust national information infrastructure that supports IT adoption and application. In a more recent study, Liang (2011) studies the development and application 11.

(20) of cloud computing and e-government in driving technology innovation and application in the government and ICT industry. The study identifies that cloud computing is a vital evolution of the Internet which allows new business opportunities to be created. Studies have examined Taiwan’s ICT industry through its nature and level of competitiveness. In a study on Taiwan’s ICT industry, Chevalerias (2010) describes the restructuring of industry in the 1980s and the political and economic difficulties it has had in more recent years. He explains how the extent of structural weaknesses of the Taiwanese economy hindered its growth during the 2000s. Finally, he examines the relevance of the. 政治大 problems and the political implications that arise with it. Tang, Liou and Peng (2008) analyze 立. Economic Cooperation Framework Agreement (ECFA) as a solution to Taiwan’s economic. four electronics companies as case studies to identify the critical role of branding and the. ‧ 國. 學. capability of manufacturing and product-brand extensions. The authors investigate a. ‧. consumer’s attitude toward business to business (B2B) brand extension on the business-to-. y. Nat. consumer (B2C) market for the ICT industry. Ho, Fang and Lin (2011) investigate the direct. er. io. sit. effect of an organization’s development of technological and design capabilities in Taiwan on technology commercialization. It used R&D teams in Taiwan developing new ICT products. al. n. v i n as case studies and determined that C both technological andUdesign capabilities have a positive hengchi effect on technology commercialization, with design capabilities being the greatest contributor. In Canadian literature, a five-year longitudinal study of eight ICT clusters across Canada was conducted by Lucas, Sands and Wolfe (2009). Each case study examines whether the viable clusters could sustain innovation and growth based on the co-location of firms, financial and legal services, research and training institutes, business and civic associations, and public support organizations. The researchers identified the key input and output actors and those that facilitated interaction in the ICT industry. Finally, they identified the linkages between these actors which include formal participation in supply chains. 12.

(21) Harchaoui et al. (2002) compares the changing composition of investment and the growth of financial services in Canada during the 1980s to the 1990s. The authors examined the historical trends of investment and capital formation. The study examines and compares the extent that ICT and other types of capital have changed and contributed to economic growth in Canada. Bramwell and Nelles (2005) examine the role of local institutions and actors in supporting the transition to the knowledge-based economy with a focus on the information and technology cluster in Waterloo, Canada. One macro-level study by Shao and Shu (2004) compares 14 member countries of the. 政治大 13-year period between 1978 and 1990. The study provides an analysis of the productivity 立. Organization for Economic Cooperation and Development (OECD) including Canada over a. level of information technology (IT) capital goods using the Malmquist Total Factor. ‧ 國. 學. Productivity (TFP) index. The Malmquist TFP index is decomposed into three components of. ‧. technological progress, efficiency change and change in economies of scale, to account for. y. Nat. the different sources of productivity growth. In their findings, Shao and Shu (2004). er. io. sit. determined that each country’s ICT industry measured differently on the TFP subcomponents. Their focus was on examining the production of IT capital goods within a cross-. al. n. v i n C h 10 had experienced country analysis. Among the 14 countries, productivity growth in their engchi U ICT industries (Shao and Shu, 2004). In another macro level study, Kauffman and Kumar (2008) measured the impacts of ICT across four development areas in 64 countries using trade flows, agricultural productivity, R&D, and quality of life as measurements. Also,. Frieden (2005) explores the relationships between the public and private sectors in promoting ICT innovation and growth in Canada, Japan, Korea and the United States in which he argues that Canada’s government has created successful support and initiatives to promote its ICT industry and foster relationships with other countries. Other studies have been performed on trade liberalization in regards to information technology use and production. Joseph and Parayil (2008) study this topic after the signing of 13.

(22) the Information Technology Agreement (ITA). They argue that complementary trade liberalization with capacity-building will enable the ITA to become an effective ICT industry building strategy in developing countries. They further argue the case for an agreement involving trade liberalization and capacity-building in order to promote ICT use and its production (Joseph and Parayil, 2008). Most studies at the firm, industry and economy level suggest that the advancement of ICT contributes significantly to productivity growth. Further access to ICT enhances industry competitiveness, the empowerment of people and improvement of social and government. 政治大 technology advancement. Joseph and Parayil (2008) examine the effectiveness of trade 立. services (Joseph & Parayil, 2008). Liberalization of trade and investment is at the core of. liberalization in bridging the digital world in the developing countries. Krueger (1997). ‧ 國. 學. defines trade policy and economic development from the 1950s. Krueger and, Bhagwati and. sit. y. Nat. reduction in poverty and total factor productivity.. ‧. Srinivasan (1999) define the connection between international trade, economic growth,. io. er. From a micro to macro scale, scholars have identified ICT industry advantages and disadvantages and successful methods of innovation through research and development. A. al. n. v i n CtohCanada’s and Taiwan’s majority of current literature relating ICT industries deals with the engchi U impact of ICT industries on productivity growth. Cross-national analyses have allowed for. the assessment of economic models and industries to be compared in order to identify which policies and strategies promote the most supportive environment for industries to accelerate in. Theory on the product life cycle and competitive advantage allow for a framework in which nations and companies can use as guidelines to create competitive industries and new ideas. The existing literature will provide this thesis with information on Taiwan’s and Canada’s ICT industries and economies by offering conclusions made on the strengths and weaknesses of both economies. Studies on the cooperation between Canada and Taiwan will 14.

(23) also provide information on the benefits of their relationship and partnerships. This thesis will contribute to the macro-level literature by assessing Taiwan and Canada’s bilateral relations in terms of ICT.. 3. Analysis of Taiwan’s ICT Industry. 3.1 Taiwan’s ICT Industry Evolution and Competitiveness From the 1980s, Taiwan’s previous import substitution and export promotion strategy based on the export of labour intensive goods was no longer leading to economic success.. 政治大. Taiwanese companies began to recognize that brand extension was a strategic asset by. 立. extending their successful business-to-business (B2B) brands to the business-to-consumer. ‧ 國. 學. (B2C) market which is a dominant factor influencing consumer awareness and brand. ‧. reliability (Tang, Liou & Peng, 2008).. Adjustment of the Taiwanese economy to transition from standardized to innovative. y. Nat. io. sit. technology was necessary for the economy to maintain competitiveness. This was stimulated. n. al. er. by the government through the promotion of R&D and by its founding of the Industrial. Ch. i n U. v. Technology Research Institute (ITRI) in 1973 and the creation of Hsinchu Science-based. engchi. Industrial Park in 1980. After the successes of the 1980s and the 1990s, growth slowed in the 2000s which was reflected to some extent by the increasing maturing of the Taiwanese economy, the dotcom bubble of 2001 and the financial crash of 2008. Weaknesses in Taiwan’s ICT industry became characterized by unbalanced growth, over-dependence on foreign technology, and a shortage of internationally recognized brands (Chevalerias, 2010). The ICT industry was the most contributing sector to Taiwan’s manufacturing output composition from 1996 to 2011 when it was surpassed by the chemical industry. Figure 1 demonstrates a historical chart of Taiwan’s manufacturing output composition including the significance of its ICT industry which rose steadily in significance from 1983 to 2000 when it 15.

(24) leveled out as the highest industry in output percentage until 2011 (Ministry of Economic Affairs, 2013, 5).. Figure 1: Historical Chart of Taiwan’s Manufacturing Output Composition. 政治大. 立. ‧ 國. 學. Source: Ministry of Economic Affairs, 2013. ‧. Figure 2 demonstrates Taiwan’s industry over time and its effects on GDP growth from a. y. Nat. io. sit. manufacturing-oriented approach in the 1950s and the 1960s to investment oriented approach. n. al. er. in the 1970s and the 1980s (Institution for Information Technology, 2015). Fluctuations in. i n U. v. Taiwan’s GDP growth can be identified during the investment-oriented period from the 1970s. Ch. engchi. to the 1990s. The capital-intensive stage led to the development of the high-tech industry in the late 1980s. This led to the need for Taiwan to look forward and change their economic model to innovation-oriented from the 1990s onward. During this period, there was steady GDP growth percentage until the present apart from the 2001 dot-com bubble and the 2008 global financial crisis. Beginning in the 1990s, Taiwan began to upgrade their industrial technology and internationalization to become a regional competitive industry in the 2000s and leading to steady and healthy GDP growth (Institution for Information Technology, 2015).. 16.

(25) Figure 2: Transformation of Taiwanese Industry, 2000-2012. 立. 政治大. ‧ 國. 學 ‧. Source: Institution for Information Technology, 2015. sit. y. Nat. Taiwan’s ICT industry percentage in terms of contribution to Taiwan’s GDP is graphed. io. er. in Figure 3 over a period of twelve years from 2000-2012 (Institution for Information. al. Technology, 2015, 7). The figure shows a steady increase from 2000 at 10.2% to 2006 at. n. v i n C h contibution to GDP 13.8%. From 2006 to 2012, the industry’s e n g c h i U declined from 13.8% in 2006 to 12.8% in 2012 (Institution for Information Technology, 2015).. 17.

(26) Figure 3: ICT Industry Percentage in terms of Contribution to Taiwan’s GDP, 2000-2012. 政治大. Source: Institution for Information Technology, 2015. 立. The Taiwanese IT hardware industry shipment value from 2004 to 2014 and data. ‧ 國. 學. communications value from 2002 to 2014 are demonstrated in Figures 4 and 5 (Institution for Information Technology, 2015, 9 & 14). Taiwanese IT hardware industry shipment. ‧. production value increased by 100% from almost USD 70 billion in 2004 to USD 140 billion. y. Nat. io. sit. in 2012. Production values decreased slightly until 2014. There is a declining year-over-year. n. al. er. growth percentage trend from 2004 to 2014 with some years performing more successfully. i n U. v. than others. The production value of Taiwanese data communications shipments shown in. Ch. engchi. Figure 5 is less significant than its hardware industry shipments. The production value rose steadily from USD 3.176 billion in 2002 to USD 17.420 billion in 2014. The year-on-year growth percentage of the communications shipment was most high from 2004 to 2007 ranging from 22.5% in 2004 and 30.1% in 2007. This, then, dramatically decreased from 2008 (10.9%) to 2009 (-4.9%) and rose again to 17.4% in 2010. These figures demonstrate that the Taiwanese ICT sector is more focused on its exports in IT hardware over communications (Institution for Information Technology, 2015).. 18.

(27) Figure 4: Taiwanese IT Hardware Industry Shipment Value, 2004-2014. 學. ‧ 國. 立. 政治大. Source: Institution for Information Technology, 2015. ‧. Figure 5: Taiwanese Data Communications Shipment Value, 2002-2014. n. er. io. sit. y. Nat. al. Ch. engchi. i n U. v. Source: Institution for Information Technology, 2015. Taiwan’s semiconductor industry also rose in production value (Figure 6) from 2008 to 2015 from TWD 1,311,600 to TWD 2,324,700 (Institution for Information Technology, 2015, 19.

(28) 25). In 2010 the growth rate of the industry rose sharply to 32% and then fell back to its previous year’s rate of -10%. It rose again from 2011 (-10%) to 2014 (18.8%) and fell again in 2015 to 8.6% (Institution for Information Technology, 2015).. Figure 6: Taiwanese Semiconductor Industry’s Shipment Value, 2008-2015. 立. 政治大. ‧. ‧ 國. 學. io. sit. y. Nat. n. al. er. Source: Institution for Information Technology, 2015. i n U. v. Taiwan’s ICT sector is an important contributor to the international ICT supply chain.. Ch. engchi. Figure 7 demonstrates that Taiwan’s market share of produced IT hardware products in 2012 had the highest global market share (by production value) for seven product categories which include notebook PCs, desktop PCs, tablet PCs, motherboards, servers, LCD monitors and digital cameras. Taiwan’s global market share for three of these products exceeded 80% (Bureau of Foreign Trade, 2013, 7). The global performance of Taiwan’s communication industry ranked at number one in terms of global market share in 2012 for a significant number of broadband communication terminal device products and broadband access device products such as personal navigation devices, 4G access products and WLAN devices, among others (Bureau of Foreign Trade, 2013). 20.

(29) Figure 7: ICT Products in Which Taiwan Holds the Highed Global Market Share (by. Worldwide Market Share. production value) 100 90 80 70 60 50 40 30 20 10 0. 87.8. 81 67.8. 66.9. 64. 62.5 53.9. 53.2 30. 19.7. 政治大. 學. ‧ 國. 立. 25. Source: Bureau of Foreign Trade, 2013. With the lowest growth since 2009, Taiwan’s economy grew only 0.8% in 2015. Several. ‧. economic indicators presently forecast that this decline will continue in 2016. Taiwan. y. Nat. sit. currently faces stiffer competition for electronic products from Mainland China and subdued. n. al. er. io. demand from external markets which continues to impact Taiwan’s annual growth (Focus. i n U. v. Economics, 2016). Taiwan’s three major industries include its ICT industry, metal and. Ch. engchi. machinery industries, and chemical industry with each comprising a third of GDP. In the three major industries, the ICT industry has the largest industrial output and number of employees (Ministry of Economic Affairs 2013). In Tsai Ing-Wen’s inaugural speech on May 20th 2016, the new President of Taiwan acknowledged that Taiwan’s energy and resources were limited and that the economy lacked momentum (Focus Taiwan, 2016). The new President argued that Taiwan’s model of original equipment manufacturing (OEM) will not be able to maintain competitiveness and that the country needs a new model for economic development. A new economic model for sustainable development needs to be based on the core values of innovation, employment and 21.

(30) equitable distribution. Further reinforcing Taiwan’s global and regional connections and bilateral economic cooperation were also a focus of her priorities on the Taiwanese economy (Focus Taiwan, 2016). This also needs to occur at a company level by simultaneously developing their technological and design capabilities to obtain optimal commercialization results and move the industry into the next stage of R&D (Ho, Fang & Lin, 2011). Despite the government’s efforts to promote R&D, Taiwan has remained in many cases dependent on American, Japanese, and Korean companies for key technology such as essential components in production which impacts its ability to produce ICT products without. 政治大 units (CPUs) and random access memory (RAM) which amounted to at least half of the 立. relying on imports of technologies. In the 1990s, Taiwan needed to import central processing. production cost of a computer (Chevalerias, 2010). Between 2000 and 2008, Taiwan imported. ‧ 國. 學. around USD 570 billion worth of electric machinery and equipment which enhanced. ‧. Japanese and Korean confidence that they would maintain their technological advantage. sit. y. Nat. (Chevalerias, 2010). The need to import technology impacts the balance of trade and,. io. er. therefore affects economic growth.. Taiwanese companies further lacked the ability to create recognized brands at the. al. n. v i n international level. Some companiesCmoved on to OriginalUDesign Manufacturing (ODM) hengchi contracts that allowed them to take on product design, and Original Brand Manufacturing (OBM) strategy which enabled them to develop their own brand. However, with the exception of Acer and Asus, this did not enable companies to extract themselves from the control of their clients and move towards independent R&D and branding (Chevalerias, 2010). Taiwan is home to some of the most competitive electronics manufacturing services (EMS) and original design manufacturers (ODMs) worldwide including Foxconn, Advanced Semiconductor Engineering, Pegatron, Quanta Computer, Compal Electronics, Wistron and Inventec (Venture Outsource, 2014). The increasing number of established ODMs signifies 22.

(31) that Taiwan’s ICT industry has had a great amount of success in transitioning from focusing on contract manufacturing to the next step of promoting their ODMs. Even though many of these ODMs rely on partnerships with companies from other countries, with these partnerships they are able to create new and innovative technologies. The next step for Taiwan is to transition these into focusing on branding and commercialization to promote ODMs into becoming Original Brand Manufacturers (OBMs). The Global Competitiveness Index 2015-2016 ranked Taiwan 15th out of 140 countries, two rankings below Canada which came in 12th (World Economic Forum, 2015). Taiwan’s. 政治大 efficiency enhancers, and innovation and sophistication factors in the World Economic 立. overall competitiveness is mapped based on three levels in Figure 8, basic requirements,. Forum’s Global Competitiveness Index 2015-2016. The results demonstrate that Taiwan has a. ‧ 國. 學. competitive advantage to other advanced economies in its infrastructure, macroeconomic. ‧. environment, innovation and market size which lend its ICT industry a favourable. sit. y. Nat. environment to prosper and promote innovation to enhance its competitiveness (World. io. n. al. er. Economic Forum, 2015).. Ch. engchi. 23. i n U. v.

(32) Figure 8: Taiwan’s Global Competitiveness Index. 立. 政治大. ‧. ‧ 國. 學. Source: World Economic Forum, 2015. y. Nat. sit. 3.2 Technological Infrastructure and Education of Taiwan. n. al. er. io. Education and Training. i n U. v. The government has focused on developing a high level of science and technology and. Ch. engchi. ICT skills. Government sponsored and promotion of manpower planning and development does have some impact on easing the recruiting difficulty for firms in the industry (Zheng & Hu, 2008). Skilled workers and proper recruitment is necessary for the ICT industry to capitalize on talent that its workforce has to offer. Table 1 outlines the number of employees (thousand persons) in Taiwan’s ICT manufacturing industry and their average output per employee from 2012. The ICT industry has the most significant number of employees (899,000 people) in the manufacturing industry, with a significant average output per employee (USD 150,000) (Bureau of Foreign Affairs, 2013).. 24.

(33) Table 1: Development of the Manufacturing Industry in 2012 Contribution to. Industry output. Number of. Average output. total output. (US$ million). employees. per employee. (thousand persons). (US$ thousand). (%) Manufacturing. 100. 413,087. 2,652. 156. 29.05. 107,732. 778. 139. 2. ICT Industry. 29.58. 135,242. 899. 150. 3. Chemical Industry. 31.43. 129,469. 482. 269. 9.94. 40,645. 464. 88. Industry 1. Metal and Machinery Industries. 4. Consumer Goods Industries. 政治大 total number of persons employed in Taiwan’s Information Figure 9 demonstrates the立. Source: Bureau of Foreign Affairs, 2013. ‧ 國. 學. and Communication services-producing industry (National Statistics – Republic of China, Taiwan, 2016). Over the five-year period of 2011 to 2015, the number of employees in the. ‧. ICT industry increased every year and is projected to do so at the end of 2016. This trend. sit. y. Nat. demonstrates the increasing talent and industry’s need for highly skilled students and workers. n. al. er. io. in science and technology.. i n U. v. Figure 9: Employed Persons in ICT Services-Producing Industry (Thousands) 250. Ch. 245. engchi. 240. 246. 246. 2015. Jan - May 2016. 241. 235. 234. 230 225. 228. 220 215. 218. 210 205 200 2011. 2012. 2013. 2014. Source: National Statistics – Republic of Taiwan, 2016. Reforms from educators and the government in incorporating ICT technologies in early education promote constructive teaching approaches that emphasize students as active 25.

(34) constructors of knowledge and cooperation (Chai, Koh & Tsai, 2010). Universities across Taiwan provide programs in science and technology which prepare students for a career in the ICT industry. The National Taiwan University of Science and Technology (NTUST), also known as Taiwan Tech, is a technological university established in 1974 in Taipei. Its colleges range from engineering, to computer sciences and intellectual property rights. Approximately 10,500 students study at Taiwan Tech yearly (Taiwan Tech, 2016). Research within the university has lead it to 1,312 patents granted from 1999 to 2015, within this number 489 are granted inventions and 119 are utility models (Taiwan Patent Search System,. 政治大 The university has collaboration with other universities and institutes worldwide where 立. 2016).. students can go abroad to gain new exposure and experience through student exchanges and. ‧ 國. 學. double degree programs. Students return from other countries with a wealth of new. ‧. knowledge that they can share with the university and the industry to promote new ideas and. sit. y. Nat. innovation. Taiwan Tech also recruits students from abroad to earn degrees at the university. io. er. which has expanded to around 5% of its total student body, accounting for over 40 countries. The university works closely with the industry which provides its funding by sharing new. n. al. Ch. research and technology (Taiwan Tech, 2016).. engchi. i n U. v. Universities in science and technology have taken a role as generators of fundamental knowledge and account for 28-30% of public R&D expenditure. Universities have doubled their R&D expenditure more slowly than public R&D institutions in Taiwan, although, still doubling over the period of 1992-93 and 2003 (Hu, 2007). The universities have become significant on the patenting front through technology licensing offices and incubation centers, both focusing on catalyzing strong entrepreneurship from Taiwan’s SMEs. Taiwanese universities have a high reputation which increases the scale and scope of their interactions with the ICT industry (Hu, 2007). Start-up companies are also given guidance and funding from certain company 26.

(35) investors. In 2015, Taiwan’s National Development Council invested USD 83 million in four different venture capital firms, including spending USD 15 million in 500 Startups which is a group that invests in start-up teams and companies around the world (Tech in Asia, 2015). However, upon referring to the 500 Startups website, out of the 800+ start-ups it has invested in, only one appears to be a small Taiwanese consumer app (500 Startups, 2016), making the investment seem ineffective. Alibaba Group, a Chinese e-commerce company that connects businesses and consumers, launched a USD 306 million fund to invest in start-ups in Taiwan. The Taiwan Entrepreneurs Fund is invested by professional investment managers and returns. 政治大 will have access to sell their products to the Greater China area, among its other online 立. will be reinvested into company portfolios. By growing within the Alibaba network, startups. consumers (Tech in Asia, 2015). As this fund is still in its early stages, it is not yet possible to. ‧ 國. 學. see its results. This fully integrated approach is key to success as otherwise many innovations. ‧. would fail to be capitalized upon.. sit. y. Nat. io. er. Public and Private Research Facilities. The Institute for Information Industry (III) was established in 1979 as a non-profit. al. n. v i n C hand private sector.UThe III was created with the aims organization (NPO) by Taiwan’s public engchi. of promoting effective application of information technology, increasing national. comprehensive competitiveness, creating preconditions and the environment for the information industry to further develop, and to strengthen the competitiveness of the ICT industry. The III works to enhance industry capabilities, develop professional talents, functions as a government think tank, and promotes international business, technology development, and application (Institute of Information Technology, 2016). The institute has been a key facilitator to advance the innovation and application in the IT domain and has developed the knowledge economy for Taiwan industry (Service Design Network, 2015). Taiwan has science-based industrial parks across the country. Modeled on Silicon Valley, 27.

(36) in 1980, the government created Hsinchu Science and Industrial Park which gives high-tech companies a space to flourish in inexpensive industrial infrastructure, an attractive tax rate, and financial support for their R&D (Chevalerias, 2010). The Hsinchu Science and Industrial Park has six locations across the island including Hsinchu, Zhunan, Tongluo, Longtan and Yilan as well as Hsinchu Biomedical Science Park. The park was established to aid and support the take-off of the ICT industry in Taiwan (Ministry of Science and Technology, 2015). The competitiveness of the companies and industry derived by these high-tech concentrations is generated from the availability of the significant pool of well-trained. 政治大 other R&D concentrations worldwide (Hu, 2007). It provides an arena and network with 立. workers and technical and managerial personnel which are now at a similar level of talent as. other institutes in Taiwan where ICT entrepreneurs and companies can work closely together. ‧ 國. 學. to share ideas and new technologies to create new innovations. The parks benefit from. ‧. geographical proximity to the other parks in Taiwan where other countries, such as Canada,. sit. y. Nat. do not have this advantage as they are spread over a wider distance across the country.. io. er. The role of public R&D institutions in Taiwan has continued to grow, doubling over the years 1994-2003. Total research and development spending in ICT by the government. al. n. v i n Ch reached TWD 241 billion by 2003 demonstrated in Figure 10, twice as much as ten years engchi U. prior. Funding from the government into its research and development institutions strengthens the contribution of specialization in its high-tech industry. Figure 10 demonstrates the increasing trends of expenditure by sector of performance during 1990-2003 through indicators of Science and Technology, with its research institutes increasing at a lower rate than the private industry and at a higher rate than universities (Institution for Information Technology, 2015). This demonstrates the effectiveness of research institutes in generating competitiveness in science and technology in the ICT industry.. 28.

(37) Figure 10: R&D Expenditure by the Sector of Performance, 1990-2003. 立. 政治大. ‧. ‧ 國. 學. Network of Scientific and Technological Institutions. al. er. io. sit. y. Nat. Source: Institution for Information Technology, 2015. n. v i n C h Institute (ITRI) U The Industrial Technology Research was established in 1973 by the engchi. Taiwanese government as a publicly-funded research body aimed at promoting innovation in Taiwan. Since its establishment, the ITRI has functioned as a vital role in transforming Taiwan’s economy from its labour intensive industry to a high-technology industry. It engages in both applied research and technical services to help industries remain competitive and sustainable. The ITRI has worked with and consulted more than 240 companies and trained over 140 CEOs in the nation’s ICT industry. The ITRI aims to strengthen its capabilities of multidisciplinary innovation and cooperation with international partners including Canada’s National Research Council (NRC) and has linkages with Waterloo Institute of Nanotechnology, Manufacturing Automation Laboratories Inc., ProSensus Inc., 29.

(38) and the University of British Columbia (Dawson Strategic and Ciuriak Consulting, 2014). The ITRI meets with Canadian partners to hold information and educational seminars. It also works closely with the NRC to bring to SMEs from both countries together to focus on innovative technologies and processes (National Research Council Canada, 2016). Since 2001, research conducted in ITRI has generated more than 800 granted patents each year. In 2003, it employed almost 6,200 staff and had funding from the government and industrial contracts that reached USD 500 million. More than 100 new firms have spawned from the ITRI, including United Microelectronics Corporation (UMC), Taiwan. 政治大 (MIRLE) and Taiwan Engine Company (TEC). As of December 2004, ITRI’s patent portfolio 立 Semiconductor Manufacturing Company Ltd. (TSMC), Mirle Automation Corporation. showed the total number of patents granted were nearly 3,000, with a strong emphasis on. ‧ 國. 學. communications, optoelectronics systems, precision machinery, automation technology and. er. io. sit. y. Nat. technological development of Taiwan’s ICT innovation strategy.. ‧. composites (Hu, 2007). The ITRI has been a leading and guiding force that has powered the. 3.3 Taiwan’s InternationalaTrade. n. iv l C n Taiwan’s exports in the 1960s were h mainly e n glabour-intensive c h i U exports such as textiles. In. the 1970s, its export moved to heavy and chemical industry such as plastics. It was in the 1980s and the 1990s that Taiwan began focusing on high-technology and knowledgeintensive industry by exporting IT equipment and services (Wang, 1999). In the 2000s, the contribution of foreign trade to Taiwan’s economic growth was much higher than that of its domestic market (Chevalerias, 2010). The share of ICT exports to Taiwan’s total trade in 2015 was 34%, accounting for a third of total exports worldwide (Trading Economics, 2016). Increase of trade and investment has improved Taiwan’s competitiveness by increasing the size of the market available to its domestic firms and by driving production and innovation by 30.

(39) exposing firms to international competition, expertise and innovation (World Economic Forum, 2015). Taiwan has been a member of the World Trade Organization since 2002. Its major trading partners are China, Japan, the United States, Hong Kong, the Republic of Korea, the EU and ASEAN nations. In 2015, Canada ranked as Taiwan’s 24th major trading partner worldwide. In the same year, Taiwan was Canada’s fourth major trading partner in the AsiaPacific region and 11th major trading partner worldwide. Among the 22 countries that recognize Taiwan diplomatically, about half are in the Latin American region which lent to. 政治大 agreements with economies in the Asia-Pacific region such as New Zealand and Singapore 立. opportunity of forming FTAs with these countries. In 2013, Taiwan signed free trade. regardless of diplomatic relations.. ‧ 國. 學. In order to normalize economic relations between the two sides of the Taiwan Strait and. ‧. promote Taiwanese trade and economic prosperity, the government launched the idea of an. sit. y. Nat. economic zone under ECFA. This would also prevent Taiwan from being marginalized by. io. er. other free trade areas being negotiated (Chevalerias, 2010). However, under the Information Technology Agreement (ITA) signed under the framework of the WTO, a considerable. al. n. v i n C h ICT product exports amount of taxes and tariffs on Taiwanese to the US, Japan, ASEAN engchi U countries, China, Hong Kong, South Korea, and others are already lowered to zero. (Chevalerias, 2010) giving these countries an advantage in ICT export trade with each other.. 3.4 ICT-Related Policies in Taiwan Taiwan’s government initiated the development of science and technology (S&T) advancement policies in the 1970s which demonstrated its commitment to industrial transformation. Promotion of national IT investment began in the early 1980s. In 1994, the introduction of the National Information Infrastructure (NII) project was introduced for a 1031.

(40) year period with the purpose of upgrading Taiwan as a telecommunications hub in the AsiaPacific region (Wang, 1999). Increasing IT implementation through industries and encouraging IT production is a further aim of this initiative to direct industries toward utilizing and integrating an increased level of information. In recent years, policy in Taiwan has been geared to create a supportive environment in which trade and innovation are able to prosper. The Taiwanese government has promoted manufacturing companies in Taiwan to move from Original Equipment Manufacturing to Original Design Manufacturing which many companies have become such as Pegatron,. 政治大 international manufacturers. Taiwan’s Statute for Upgrading Industry was implemented in 立 Quanta Computer and Compal Electronics. These companies are all highly successful. 1990 with a longevity of ten years and has subsequently been upgraded and updated in 2000. ‧ 國. 學. and 2010. The Statute for Upgrading Industry was first established in 1990 and then. ‧. revamped in 2000 due to the initial and continued need for structural transformation and for. sit. y. Nat. the promotion of international competitiveness. The Industrial Innovation Act passed by the. io. er. Taiwanese government includes incentives to promote innovation-related research and development and supports new industries (Asia Monitor, 2011). The government has also. al. n. v i n begun to focus on cloud computingC in both e-government U h e n g c h i and ICT industry development to. advance its technologies and applications. The e-government projects focus on enhancing IT infrastructure, delivery of web based government services and develop an e-community from. the services it provides to push the industry to becoming IT leaders (Liang, 2011). Proper leadership in technology advancement from the government in Taiwan has provided a platform and example from which the ICT industry can prosper. Taiwan’s research and development, design, engineering, information and consulting fields have developed as a division of its technical services industrial sector (MOEA, 2013). The Industrial Development Bureau (IDB) was established by the Ministry of Economic Affairs with one of its main objectives to upgrade and transform its existing ICT industry. In 32.

(41) May 2011, the government established the Outline for Industrial Development which includes transforming and promoting Taiwan’s industrial structure (MOEA, 2013). The ministry argues that its established infrastructure, numerous industrial parks, enhanced technological capabilities, competitive tax schemes and legal framework present Taiwan as an attractive environment for industrial development (MOEA, 2013).. 3.5 ICT Patents Granted in Taiwan Taiwan amended its patent law in 1994 with the objective of helping Taiwan upgrade its. 政治大 The amended patent law established a legal infrastructure for the cultivation of new 立. industry, establish itself as a modern nation and eliminate friction with its trading partners.. ‧ 國. 學. technology and gained Taiwan acceptance and reliability in global trade (Skrehot, 1996). Taiwan generates some 30 patents per 100,000 people which is about as many as Japan and. ‧. the United States who are the best performers among developed countries. Patents are granted. sit. y. Nat. across various technology types as Taiwan has emerged as a center of technological. io. er. innovation and is a source of knowledge diffusion for the rest of the economies in the region.. al. v i n C h and upgradingUdomestic technological emphasis on licensing of foreign technology engchi n. Most East Asian patents are held by Japan, Taiwan or Korea (Brahmbhatt & Hu, 2010). The. capabilities is reflected in the number of patents granted to Taiwanese companies. Over the past decade, Taiwan has demonstrated a significant increase in patenting rates in science and technology, allowing it to lead amongst East Asian countries at a similar capacity to Israel and Finland as shown in Table 2. The table shows that for the 1997-2001 period, Taiwan achieved the third highest position per capita patenting rate in the world, after the United States and Japan, reaching 17.2 per hundred thousand people.. 33.

(42) Table 2: Country Statistics: Averages for 5- and 30-year periods (utility patent only). 立. 政治大. ‧. ‧ 國. 學. Source: Brahmbhatt & Hu, 2010. al. v i n C h and Competitiveness Canada’s ICT Industry Evolution engchi U n. 4.1. er. io. Analysis of Canada’s ICT Industry. sit. y. Nat. 4. The Canadian ICT industry experienced a steady increase in the growth rate of exports and services during the second half of the 1990s. In the past five years this industry has had to face challenges of the global economic downturn and competition with India and China as low cost centers in manufacturing and software development. In order to compete, Canada’s ICT sector will need to reposition itself in the areas of research and innovation, talent and investment (City of Toronto, 2010). Canada’s ICT industry consists of 40,000 firms, 30% of which are in Toronto, Ontario. Other technological hubs in Canada include Vancouver, Calgary and Ottawa. The new Liberal government elected in 2015 has demonstrated 34.

(43) willingness to provide funding for new ideas through start-up companies and facilities who promote research and development in the Innovation Agenda (2016 Federal Budget, 2016). Canada’s current government has been encouraged to reinstate technology firm incubator programs such as repayable loans for start-ups to assist new commercial ventures that are short of capital. The ICT sector is important to the Canadian economy as it is a driver of GDP growth. From 2002 to 2011 it was the fastest growing industry in Canada and grew at a rate of more than double other industries as shown in Figure 11. It has generated 6.2% growth but has a. 政治大 sector’s share of national GDP was behind all major competitors at 3.8% in 2008. 立. low percentage of GDP compared to other countries shown in Figure 12. Canada’s ICT. ‧ 國. 學. Figure 11: ICT Sector and All Other Industries Growth 2002-2011 (index 2002=100). ‧. n. er. io. sit. y. Nat. al. Ch. engchi. Source: Industry Canada, 2013. 35. i n U. v.