Managing Cross-border Innovation Networks: Taiwan's IC Design Industry

Abstract

Most recent studies on the cross-border economic activities of the Taiwanese IT industry have paid much attention to the firms' utilization of cheap labor in China to become turnkey suppliers for major multinationals. Few have engaged in research on the formation of the Taiwan IT industry's cross-border R&D or innovation networks, which has become an increasingly important trend in recent years. The purpose of this paper is to depict and analyze this phenomenon, while paying special attention to the IC (integrated circuit) design industry. In this paper, we distinguish between three major types of cross-border innovational networks: global firm led-, foundry led-, and IC design firm led-innovation networks. We will show that, of the three types, the Taiwanese side tends to be engaged in the core part of product development, whereas the Chinese counterparts tend to be more involved in improvement, localization and manufacturing R&D, plus some basic research by collaborating with universities. In a departure from the existing literature on global innovation networks, where the focus is on the leading firms in advanced countries, this paper argues that, as a technologically fast follower, the Taiwanese IC design industry intends to fully utilize the rise of China to build up its technological and organizational capabilities in the hope of becoming a market leader as it escapes from the control of global firms.