Written by Nicholas Borroz.
Taiwan’s government intervenes to develop its space industry. It is one of several political economies characterised by solid government intervention approaches to guide market actor behaviour. This robust interventionist approach has different strengths and weaknesses. In terms of strengths, Taiwan’s approach can help establish local dominance in niches in global value chains. In addition, it can incentivise the growth of certain business areas that will benefit the economy and coordinate the development of complementary business areas.
A strong interventionist approach like that of Taiwan also has potential drawbacks, however. It incentivises firms to pursue business areas prioritised by the state, dulling their awareness of market demand. This can weaken business entrepreneurialism, with firms simply waiting to react to what government wants them to do. A strongly interventionist approach also leaves firms vulnerable to shock; firms in state-cultivated ecosystems can be in for rude awakenings if they attempt to expand to foreign markets or if their governments change policies.
Taiwan is not unique in its efforts to cultivate a space industry. Many governments intervene to influence the behaviour of market actors to develop their domestic space industries. Some countries intervene similarly to Taiwan (e.g. South Korea), while others intervene very differently (e.g. New Zealand and Australia). As a result, there is growing competition between firms and governments to establish dominance in specific niches in the global production networks that support humanity’s engagement with the cosmos.
As competition ramps up, to understand what is happening in Taiwan, it is worth appreciating why and how its interventions compare to those in other political economies. Comparison of this sort allows for more refined expectations. More refined expectations, in turn, inform stakeholder strategy. Firms, if they can anticipate how Taipei will intervene, may adjust their strategy accordingly. Likewise, if it understands how its inclinations compare to those of other governments, Taipei may modify its approach to intervening in the space industry.
The Developmental State Perspective
A comparative political economy perspective is one way to understand why and how Taiwan’s government intervenes (and thus helps stakeholders form expectations and plans). This perspective is concerned with the interaction of political and economic systems, which is obviously relevant to the question because the government’s market interventions determine how political and economic systems interact.
There are various literatures within comparative political economy, but one that discusses Taiwan extensively is the developmental state literature. This literature links different “mindsets,” meaning views in government about its proper role in terms of intervening in markets, to different intervention outcomes. In the parlance of the literature, “plan-rational” political economies intervene differently than “market-rational” political economies because of different mindsets. In plan-rational political economies, governments see their proper role as guiding market activity. In market-rational political economies, governments see their adequate role as facilitating market activity. Taiwan is an example of a plan-rational political economy.
There are different views in the literature on the importance of mindset, with some scholars prioritising “structural” factors as being more critical. One such structural factor is business-government relations, which matter because if government workers are “embedded” in industries, then they better understand market realities. In addition, if they are “autonomous” from business interests, this also matters because they manage to avoid being corrupted. Different types of “embedded autonomy” thus importantly lead to other sorts of interventions.
Another structural factor often highlighted in the literature is government organisation. Some governments are more centrally coordinated than others. They have led economic development agencies that orchestrate other government entities’ interventions (the Singapore Enterprise Development Board is often cited as an example). Other governments, though, are characterised as being flatter and thus as having less central coordination.
Using the Developmental State Perspective to Understand Taiwan
This is relevant to understanding Taiwan’s space industry because the developmental state literature offers a way to appreciate how the government will intervene. Taiwan is one of several political economies that are well recognised as plan-rational and have governments actively intervening to develop their space industries. Yet despite these political economies all having similar plan-rational mindsets, they intervene differently.
Comparing Taiwan to another plan-rational political economy, based on theorisation from the developmental state literature, can refine expectations about how Taiwan’s government will intervene. Future scholarship should thus adopt a developmental state perspective to explain why Taiwan and another plan-rational political economy differ in their space interventions.
South Korea is one plan-rational political economy that is potentially worth comparing to Taiwan. Like Taiwan, it actively intervenes to develop its space industry and has a similar plan-rational mindset. Both governments see their appropriate role as guiding market actors’ behaviour to support national development goals. The two governments differ in their interventions, though. On the one hand, Taiwan’s National Space Organization (NSPO) tends to target support to market actors that already work in planned business areas. On the other hand, South Korea’s Korea Aerospace Research Institute (KARI) sometimes targets its support toward market actors not yet working in the business areas it plans to develop. KARI, in other words, appears to have more of a forward-leaning industrial policy than NSPO does.
Proposal for Future Research
Future scholarship should test explanations for these differences that are based on the developmental state literature. One potential answer indicated by previous research is that structural factors mediate the extent to which mindsets affect interventions. Thus, if two governments such as those in Taiwan and South Korea have similar attitudes, but if they intervene differently, then this indicates other factors may be mediating a given mindset’s effects on intervention. Structural factors like embedded autonomy and government organisation are the most apparent factors discussed in the literature. Previous scholarship has indeed argued structural factors can affect how much governments realise their mindsets when intervening.
Future scholarship should compare space industry intervention in Taiwan and in another plan-rational political economy. There is already existing research comparing space industry intervention in Taiwan and South Korea, so continuing research on that particular comparison may be an appropriate starting point. Future research should confirm that relevant government agencies in comparator political economies do indeed have similar mindsets. Furthermore, it should ensure that the interventions are indeed different (both in terms of “targets” and “tools” of interventions). If the comparator political economies indeed have the same mindsets, but if they differ in terms of their interventions, future research should examine if comparator political economies differ in structural factors like embedded autonomy and government organisation. The purpose of that future scholarship, in other words, should be to explain if comparator political economies, despite their similar mindsets, intervene differently in their space industries because they vary according to structural factors.
Whatever refined explanations result from such future research, a next step would be to expand it to explain space industry interventions in political economies with entirely different sorts of mindsets (e.g. market-rational political economies like New Zealand and Australia). This expanding of the empirical context would allow more refinement of the explanation to be relevant and provide expectations about space industry interventions in a wide variety of political economies, not just those where governments have plan-rational mindsets.
Besides advancing the developmental state literature, scholarship comparing Taiwan’s space industry interventions to those in other political economies has the potential to improve stakeholders’ expectations. If future research, for instance, confirms that South Korea has a more forward-leaning industrial policy than Taiwan due to structural factors, then this has implications in terms of the strengths and weaknesses of Taiwan’s strong intervention approach. This is because the strengths and weaknesses mentioned in the opening of this article are essentially due to interventions being “strong.” So, if future research confirms that Taiwan’s interventions are “weaker” than Seoul’s (i.e., Taiwan has a less forward-leaning industrial policy), then this would mean that Taiwan’s interventions would have fewer potential benefits and drawbacks than Seoul’s interventions. It would imply, in other words, that Taipei is less able than Seoul to transform the industry radically, but that Taipei is less likely than Seoul to insulate firms from market realities and leave them open to shock. Insights such as these would inform stakeholders in Taiwan’s space industry as they devise their strategies.
Nicholas Borroz recently completed his PhD in international business at the University of Auckland, comparing government intervention in the Asia-Pacific. He furthermore consults for clients in the space industry via his Auckland-based firm, Rotoiti Consulting Limited. He also manages Filling Space, a website that features weekly interviews with space experts.
This article was published as part of a special issue on Science and Technology.