In the shadow of the state: The political economy of small business in Taiwan

For several reasons, Taiwan has been a notable exception to the "rule" that small firms are "backward" and are marginalized as economies produce more sophisticated products. While the government has subjected economic activities to its industrial policy, it has lacked consistent and collaborative relationships with the private sector, leading to the creation of economic space in which indigenous preferences could be expressed. These preferences involve a more personal mode of business, which is most easily carried out on a small scale. Further, small firms have used certain cultural particularities, such as an intermittent obedience to the rule of law, in order to cut corners and stay competitive despite the frequent negligence of their financial needs. In fact their smallness and the relational mode of business which facilitates it, which are normally deemed weaknesses, have certain economic advantages which small firms have used to contribute to Taiwan's development.