Public policies for the promotion of an innovation-driven economy in Taiwan

Taiwan is heavily dominated by SMEs and thus suffers from the lack of economies of scale in R&D work. Interestingly, Taiwan ranks very highly in the world in terms of patents granted by the USA. Is Taiwan really very successful in R&D and innovation? What policies has the government adopted to overcome the island's deficiencies in lack of economies of scale and achieve a high level of R&D? What lessons can policy makers from other countries learn from Taiwan's experience? These are the questions discussed in this paper. The paper reveals that, in the past, Taiwan was very successful in using tax incentives, science-based industrial parks and public research institutions (such as ITRI) to promote and encourage R&D and innovation. However, as Taiwan moves towards a KBE, these tools are no longer adequate. The government has, consequently, implemented new tools such as venture capital, innovation incubators, an open laboratory system, and e-commerce. The effectiveness of these policies cannot be assessed at this moment because they are too new.