High-Tech Strategies across the Taiwan Strait: Taiwanese Enterprises' Operational Modes Reconsidered

A major assumption regarding the cross-strait division of labor in the high-tech industry is that Taiwan should treat the Chinese market as a beachhead and maneuver brand-creating operations to obtain higher margins in the global market. Taiwanese scholars and officials almost unanimously expect such an attempt to reap great rewards. I aim to demystify this argument and demonstrate that the dream of brand-creation may turn out to be an illusion.     This study shows the contrast in both states’ roles in helping information technology industry. Contrary to Taiwan with little state intervention/assistance, China spares no efforts to grow local companies by a variety of protective policies. This helps clarify not only the puzzles why both sides specialize in different capabilities but also the power relations across the Strait. Moreover, the dilemmas that Taiwanese manufacturers will confront and the difficulties of brand-name creation inherent in Taiwan’s market structure and industrial organization will be discussed.      Data show a continuous decline in Taiwanese companies’ brand-creating attempts since the mid-1990s. Scholars and officials may be surprised at this fact. Viewing through a new perspective, i.e. functional vertical division of labor, this study makes us doubt the legitimacy of brand-creation strategy and rethink possible alternatives to the current difficulties.