The competitive advantage of taiwan

Abstract

In his monumental study, The Competitive Advantage of Nations, Michael Porter distinguishes between the concepts of what he calls ‘competitive advantage’ and the more traditional ‘comparative advantage’ of David Ricardo. This chapter explores whether Taiwan did have a competitive advantage, in the sense of Porter. It reviews briefly the economic success story of Taiwan. The chapter examines the factors for Taiwan’s success and its competitiveness. In the 1960s, Taiwan adopted a system of floating exchange rates which turned out to be de facto a system of managed rates. While exports have led Taiwan’s economic growth, the exports have undergone significant transformations. The demand conditions that faced Taiwan as it began its process of industrialisation were quite favourable. There was the successful conclusion of the Kennedy round of multilateral trade negotiations, which led to major reductions in tariff and non-tariff trade barriers, and the 1960s and the early 1970s were a period of robust growth in the industrialised countries.