Heading South: Co-sharing as Taiwan’s niche strategy

Written by Mei-Chih Hu and Hsien-Chen Lo.

In 2016, Taiwan’s government launched the New Southbound Policy aimed to establish long-term economic ties between Taiwan and Southeast Asian (SEA) countries. This initiative showed not only Taiwan’s determination to address the issue of over-reliance on the Chinese market, but also its ambition to enhance its regional competitiveness in the forthcoming digital era.

According to the IDC (one of the leading international market consultants), the number of Internet-of-Things (IoT) installed devices in the Asia Pacific region is expected to grow from 3.6 billion in 2014 to over 10 billion by 2020, bringing the IoT market opportunity to USD 2.6 trillion. The astonishing growth in IoT-related adoption and revenue is widely acknowledged as one of the major economic engines in SEA emerging markets, China and India. Indeed, SEA emerging economies are experiencing a profound industrial transformation as they leapfrog toward digitalization through IoT adoption and utilization.

Lacking indigenous innovation capability, SEA emerging economies actively encourage foreign investments to set up joint ventures with local companies in order to accelerate their industrial upgrading. Consequently, many leading multi-national companies (MNCs) have gained a strong foothold in SEA markets, especially those from Japan, the USA, and China. With large amounts of capital, MNCs have increasingly dominated local production system and industrial clusters. As such, the local value chains in SEA markets have come to be largely controlled by MNCs, making it even more difficult for small and medium-sized enterprises (SMEs), such as those from Taiwan, to compete. Given this inherent resource disadvantage, in order to help Taiwan’s SMEs access SEA markets, we have seen Taiwan adopting a ‘co-sharing niche strategy’ distinct from the traditional foreign investment approach.

Co-sharing as Taiwan’s niche strategy

Instead of directly competing with MNCs in terms of capital investments, Taiwan is adopting a ‘co-sharing niche strategy’ to explore growth opportunities in SEA markets. In line with Taiwan’s ambition to become one of Asia’s innovation and entrepreneurship hubs, the co-sharing strategy is intended to enable interaction and exchange of innovative and entrepreneurial resources between and amongst Taiwan and SEA emerging economies so as to establish a co-sharing and co-evolutionary ecosystem across the Asian region.

In fact, in many emerging economies, the increasing economic dominance of MNCs has become a central problem in developing indigenous innovation capabilities. On the one hand, SEA emerging countries rely on the investments and advance production activities of MNCs to help accelerate their industrial upgrading. On the other hand, as these emerging economies are eager to develop their own indigenous innovation capabilities, they are seeking opportunities to reduce reliance on MNCs as much as possible.

Taking such dilemma as an opportunity, we have observed that some of Taiwan’s entrepreneurial universities, such as National Tsing Hua University (NTHU) and public research institutes such as the Industry and Technology Research Institute (ITRI), have recognized the need to build a co-shared ecosystem with SEA emerging countries and are taking the lead to demonstrate their social obligations to Taiwan’s industrial development as a whole. Motivated by government-led New Southbound Policy projects, these universities and public research institutes act as bridging mechanisms to facilitate networking and business match-making for various industrial players between Taiwan and SEA countries, providing multifaceted platforms for assisting SEA entrepreneurs and young talents to acquire critical resources and capabilities. For example, TRIPLE (Taiwan Rapid Innovation Prototyping League for Entrepreneurs, initiated by ITRI) provides a platform for assisting entrepreneurs to acquire critical resources and capabilities during their early-stage development by enabling them to leverage the institutional capacities accumulated in Taiwan’s industrial systems. With decades of experience with its own successful industrial transformation, Taiwan wishes to share its accumulated resources and capabilities, and continue growing along with the SEA emerging markets from the bottom up.

It is still too early to say whether Taiwan will be able to become one of the significant players among SEA markets; however, we expect to see this innovation niche-driven approach enable a virtuous cycle by circulating innovative and entrepreneurial resources between and amongst Taiwan, SEA emerging economies and other SME latecomers. In facing the disadvantages brought by the dominance of MNCs and foreign investments, Taiwan’s niche strategy may allow both Taiwan and SEA emerging economies to co-create and co-share both growth opportunity and economic gains while creating a sustainable society.

Mei-Chih Hu is a Professor at the Institute of Technology Management, National Tsing Hua University, Taiwan. Her research is in the areas of innovation system, intellectual property rights, emerging industries in Asia, and latecomer strategy.

Hsien-Chen Lo is a PhD candidate at National Tsing Hua University. He is working for the Southbound Asian Silicon Valley research project funded by Taiwan’s Ministry of Science and Technology. Image credit: CC by Nik Cyclist/Flickr

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