Presentation in International Academic Conference

Role of Entrepreneurship in Future Economic
Development of Taiwan
Presented by:
Mahendar Kumar
International Academic Conference, Siam
University, Bangkok.
15-16 June 2015

This Presentation will cover the following
Contents:
1. Introduction
2. Literature Review
3. Research Methodology
4. Final Results
5. Conclusion and Discussion

Introduction:
Taiwan is an economic success since 1992; Taiwan’s GDP growth has averaged 4.5 percent.
This raised real per capita income from $9,116 in 1992 to $19,762 in 2012, with the result
that today Taiwan is the 28th wealthiest country globally, and 6th richest country in Asia.
Taiwan populations is approximately 23.4 million in 2014 with 1.3 million SMEs until
2013(White paper on SMEs, 2013)
The successful development of Taiwanese small and medium-sized enterprises (SMEs) has
become the most important part of Taiwan’s economic legend. Taiwan experienced a
spectacular development with rapid growth as well as an ongoing transformation from a
traditional agricultural-oriented to a modern industrial and service oriented economy
(Veselka, 2005).
The main pillar of Taiwan economy was the production capacity of small and medium sized
enterprises (SME’S) that played a vital role in the economic success of Taiwan in the
past(Sanyang and Huang, 2013,p1). A journey of SME’s started in Taiwan after Second
World War 2 when each country started to give more value and importance to venture
capital (Kenney, Han and Tanaka, 2002, p11).
According to global competitive index report-2012-2013, Taiwan is ranked as innovation
driven economy because of the fact that Taiwan has high educational standard and
adaptation rate of new technology and sophisticated business processes is also pretty
appreciable. Taiwan grabbed 13th position in the index that shows Taiwanese intellectual
capability and capacity for innovation and adaptation of new technology (Global
Competitiveness report 2013).

Statement of Problem:
This study is intended to explore factors that contribute in entrepreneurial activities
and the relationship of those factors with the future economic development of Taiwan.
The study is carried out based on the evidences from the past the SMEs played a
central role in the economic development of Taiwan therefore; this study will explore
its role in the future economic development. It is essential to discuss the definition of
entrepreneurship in order to explain the problem more deeply.
This study will show a relationship between entrepreneurship and future economic
development of Taiwan and how entrepreneurship can impact the economic
development of Taiwan in future.
Research Questions:
1. The role of Non-technical innovations of SME’s in terms of entrepreneurship and
its relationship with future economic development of Taiwan?
2. The role of human resource productivity of SME’s in terms of entrepreneurship
and its relationship with future economic development of Taiwan?
3. The role of government policies regarding SME’s in terms of entrepreneurship
and its relationship with future economic development of Taiwan?

Objectives of the Study:
1. To understand the current situation regarding non-technical innovation of
SMEs in terms of entrepreneurship and explore its relationship with
future economic development of Taiwan.
2. To understand human resource productivity of SMEs in terms of
entrepreneurship and explore its relationship with future economic
development of Taiwan.
3. To understand government policies regarding SMEs in terms of
entrepreneurship and explore its relationship with future economic
4. To analyze the role of entrepreneurship in terms of social and economic
impact on future economic development of Taiwan.
5. To produce a conclusive statement based on the observations of the study.
Scope of the Study:
This study will cover three elements of entrepreneurship namely; non-technical
innovation, government policies regarding SME’s and human resource
productivity and it will define their contribution in the future economic
development of Taiwan. This study will also indicate social impact of Small and
medium sized enterprises (SMEs) on the future economic development of Taiwan
mainly in terms of employment.

Transaction cost theory:
This study has used transaction cost theory that is also called “Theory of the Firm” by
Ronald Coase (1937) in order to elaborate the role of entrepreneurship in the future
economic development of Taiwan. This theory mainly defines that the firms exist not
because of carrying out the functions of production, marketing and distribution of
goods and services on the large scale but it defines that the firm exist because of the
internal transaction costs of carrying those operations are less than the outside world as
this is defined by Coase(1937) that “It began to be seen that there was something more
important than the relations inside each factory or unit captained by an undertaker;
there were the relations of the undertaker with the rest of the economic world outside
his immediate sphere.pp20..
According to the Coase (1937), the firm exists because it’s profitable to organize
certain specialized operations through entrepreneurial efforts based on transaction cost
mechanism. He further explains that it’s the cost that defines what the firm will
produce or what can’t be produced based on its internal specialization that can reduce
the costs of one commodity as compared to other. It’s also explained by him that like
that way “The entrepreneur has to carry out his function at less cost, taking into
account the fact that he may get factors of production at a lower price than the market
transactions which he supersedes, because it is always possible to revert to the open
market if he fails to do this” (Coase, 1937).

Conceptual Framework:
Miles and Huberman (1994) defined a conceptual framework as a visual or written
product, one that “explains, either graphically or in narrative form, the main things to
be studied—the key factors, concepts, or variables—and the presumed relationships
among them” (p. 18). The conceptual model of this study has followed theory of the
firm (1937) as the basis in order to explain the relationship between factors of
entrepreneurship and future economic development of Taiwan. Then the researcher has
developed following model and chosen three independent variables in order to define
entrepreurship.

Literature Review:
Economic Development is mostly characterized by increasing gross domestic product
GDP in nations and GDP per capita (Rautakivi, 2012). Economic development can
also be referred to as the quantitative and qualitative changes in an existing economy
(Todaro & Smith, 2011). Economic development involves development of human
capital, increasing the literacy ratio, improve important infrastructure, improvement of
health and safety and others areas that aims at increasing the general welfare of the
citizens (Todaro & Smith, 2011).
When social mobilization increases expectations and ambitions, economic
development increases the capacity of society to satisfy their ambitions and therefore
should tend to reduce social frustrations and any resulting political instability
(Huntington, 1968).
Taiwan started its journey of economic development after Second World War in
1940’s. The government of Taiwan had focused at that time on agriculture sector,
making it efficient and producing infrastructure development to promote
industrialization in the country (Verma, 2013).

Entrepreneurship can contribute in important ways to economic development. One
way it does this is through innovation, which involves the development of new
products, new processes, new sources of supply, but also the exploitation of new
markets and the development of new ways to organize business (Szirmai, Naudé,&
Goedhuys,2011).
Non-technical innovation is integral part of innovation process and it supports and
complements technical innovation (Armbrustera, Bikfalvib, Kinkel , Lay, 2008).
Technological innovation is usually seen as encompassing product and process
innovation. However, the distinction between product and process innovation,
frequently used in manufacturing, is less clear-cut, or even meaningless, in services
(Gallouj and Weinstein, 1997; Evangelista, 2000).
This is also mentioned by Oslo manual (2005, Edition), “This non-technological
character is reflected in the definition of the two new types of innovation introduced to
the definition of innovation in the third (i.e.2005) edition of the Oslo Manual. They are
defined as follows:
“A marketing innovation is the implementation of a new marketing method involving
significant changes in product design or packaging, product placement, product
promotion or pricing.” (OECD, 2005:pp172).
An organizational innovation is the implementation of a new organizational method in
the firm’s business practices, workplace organization or external Relations.” (OECD
2005: pp 180)”.

Human Resource productivity is a revealing indicator of several economic indicators as
it offers a dynamic measure of economic growth, competitiveness, and living standards
within an economy. It is the measure of Human resource productivity (and all that this
measure takes into account) which helps explain the principal economic foundations
that are necessary for both economic growth and social development (OECD, 2008).
Mallick (2013) argued that Human resource productivity has a close relationship with
economic growth and is a determinant of economic stability. The entrepreneurship of
human resource has contributed immensely well in the economic development of
Taiwan as argued by Wu and Huang(2003) that The key players are the many
Taiwanese businessmen, sometimes called “black-hand bosses,” who were once
machinists and apprentices but eventually became successful employers.
The government policies actually determines the success and failure of SME’s because
SME’s require external financial and legal support to compete and grow in the
competitive environment as argued by world bank (1994, 2002, 2004) that “The pro-
SME policy is based on three core arguments, First it argues that SMEs enhance
competition and entrepreneurship and hence have external benefits on economy-wide
efficiency, innovation, and aggregate productivity growth. From this perspective, direct
government support of SMEs will help countries exploit the social benefits from
greater competition and entrepreneurship.

Research Methodology:
This research is an inductive qualitative research which used interpretive approach
based on the secondary data from different resources to analyze the research problem.
Inductive reasoning begins with specific observations and concludes with broader
generalizations and theories (Trochim, 2002)
This research is an applied research because it’s carried out to understand a particular
business phenomena and its effect in the future as the applied research definition
suggests “Applied research is done to solve specific, practical questions; for policy
formulation, administration and understanding of a phenomenon. It can be
exploratory, but is usually descriptive (Kothari, 1985)”.
The research has carried out in natural settings therefore it is non-contrived. The
research has used Nvivo 10 qualitative software to analyze the data through coding
and text search and word frequency query at the end.
Nvivo Software:
NVivo is a qualitative data analysis(QDA) computer software package produced
by QSR International. It has been designed for qualitative researchers working with
very rich text-based and/or multimedia information, where deep levels of analysis on
small or large volumes of data are required.

Final Results:
This research is carried out on the topic of role of entrepreneurship in the future economic
development of Taiwan and strived to answer three research questions related with this
topic.. The variables used to investigate entrepreneurship were Non-Technical Innovation,
Human resource productivity and Government Policies. This research had following
questions to be answered by the research process:
1. The role of Non-technical innovations of SME’s in terms of entrepreneurship and its
relationship with future economic development of Taiwan?
In the pursuit to find the answer of first question, researcher has found immense data and
literature that supported the answers that are going to be concluded by the researcher like
Economic growth can occur in two ways: (1) improvement in technical knowledge
(neoclassical studies largely focus on this aspect of research), and/or (2) increased
awareness of the availability of opportunities. Hence, economic growth occur not only
“because of the availability of new opportunities, but because of expanded awareness of
existing opportunities” (Kirzner 1985, p. 74). “
Along with this obvious and clear evidence, researcher has found the linkage between
non-technical innovation of SMEs and economic development of Taiwan by using
Nvivo 10 software,
It concluded by the two queries namely word frequency and text search query through
Nvivo 10 that there is a definite relationship between the role of non-technical innovation
of SMEs and the future economic development of Taiwan.

2. The role of human resource productivity of SME’s in terms of entrepreneurship and its
As this research move forward to find out the answer of the second question of this
research that was about the human resource productivity of SMEs of Taiwan and its role in
the economic development of Taiwan. The researcher found out that there is a strong
relationship between human resource productivity and economic development of Taiwan.
Based on the fact that Taiwan SMEs accommodate more than 75% of the total workforce in
Taiwan. The researcher also concluded with other scholars like Sriyan de Silva(1997) and
(Becker et al, 1990 that human capital is an endogenous driver for economic growth and
economic growth is necessary for economic development.
Economic growth boils down to three factors: capital, labour, and how they are used – i.e.,
productivity. Strong and increasing productivity is vital to drive wealth creation and create
a successful and sustainable economy(Mann, Lee, Ng, Henderson, & Devesh 2014).
The researcher has used two queries of Nvivo 10 in order to find out the
relationship and role of human resource productivity of SMEs in the future
economic development of Taiwan and it concluded that:
There is a definite relationship between the role of human resource
productivity of SMEs and the future economic development of Taiwan.

3. The role of government policies regarding SME’s in terms of entrepreneurship and its
In the final quest to search the answer of the third question the researcher has found that
government policies was the central for the entrepreneurship growth and development in
Taiwan because without pro- SMEs policies, it could never be grown and prospered until
this stage. This was also mentioned by ministry of economic affairs of Taiwan that “The
emergence of Taiwan's SMEs is closely related to the economic, social and educational
policies adopted by the government in the past. The "Land to the Tiller" program and the
Economic Construction Plan”.
The above transcripts and other scholars related with this subject supported the researcher
idea that the government policies regarding SMEs have the relationship and play their role
in the economic development of Taiwan. Small and medium enterprises are playing a very
crucial role in the economic development of any country because they are easier to operate
and individuals can groom their career and financial stability through their solely owned
enterprises. Small and medium enterprises are central to economic development; they are
the backbone of a country which wants to project itself as a fully developed nation with
equitable socio-economic growth (YES SME, 2012). Interestingly, 95% of all registered
firms across the world are SMEs, and the number is as high as 99% for regions like Europe,
Therefore SMEs play an integral role in fueling the progress of any country (YES SME,
2012).
It concluded finally by coding all data on the subject and analyzing it through Nvivo 10
word query and text search query that “There is a definite relationship between the role of
government policies regarding SMEs and the future economic development of Taiwan”.

Conclusion
The final findings have achieved the five objectives of this study and the fifth objective
of this research was to produce a final conclusive statement based on the observations
concluded by the final findings of the research.
Observation No: 1
It was observed by the researcher of this study is there is a relationship or there is a
connection between all three independent variables namely non-technical innovation in
SMEs, human resource productivity of SMEs and government policies regarding SMEs
and dependent variable role of entrepreneurship in future economic development of
Taiwan. This result was concluded by using word frequency analysis and text search
query in Nvivo 10 qualitative software.
Observation No: 2
There are also evidences found in this research about the economic impact of SMEs of
Taiwan in terms of its GDP portion that is less than 20%, Annual sales share is less than
(30%) export sales share (17.74%), and industrial share. Taiwan economy is mostly
consists of service industry (68.19%) but Taiwan SMEs don’t put their heavy share in
Service industry (less than 10%).

Observation No: 3
This was also found by the researcher that most workforce of Taiwan is dependent on
SME operations of Taiwan therefore the social cost of not supporting SMEs can be high as
79% of total work force of Taiwan is accommodated by SMEs and Productivity index of
Taiwan is also going high 103.6p in 2014 as compared to 99.37p in 2013 .This is also a
fact that most new organizations that are opened in Taiwan are SMEs as ratio of SMEs in
total enterprises is increasing (97.64%).
Observation No: 4
The net operating profit of SMEs (4.79p) as compared to large corporations is lower than
large corporations (5.19p) and SMEs of Taiwan that survives for more than 20 years is
only 23% as compared to 38% of large corporations. The planning to expand figure
depicts that SMEs are less willing to expand their business (15.56p) in the future as
compared to large corporations (21.92p) as can be seen in below figures.
This research concludes that there is definitely a relationship between
entrepreneurship and economic development of Taiwan considering that fact
that SMEs contribute in the absorption of human resource and produce
competition in the market but this is also a fact that the SMEs are not
capable to produce substantial economic impact on the future economic

Conclusive Statement of this Research:

References:
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Statistics,” Paper presented at the Second Conference of the European association of Taiwan Studies, Ruhr
University, Bochum, Germany, April, 1-2.
Kenney M. Han K. and Tanaka S. (2002), the globalization of venture capital: the cases of
Taiwan and Japan, World Journal of Agricultural Sciences 4 (S): 884-890, 2008.
Global Competitiveness Report (2013) issued by World Economic Forum, Geneva, Switzerland
Coase, R.H., (1937). The nature of the firm. Economica, the Nature of the Firm: Origins, Evolution and
Development. Oxford University Press, New York, pp. 18–33.
Rautakivi T. (2012), “Impact of Foreign Direct Investment (FDI) on economic growth in
Asia’s newly industrialized Countries- 3- 4, Burapha University, Thailand.
Todaro, M. P.; Smith, S. C. 2011. Economic development, eleventh edition. Pearson Education
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London School of Economics and Political Science, London, April 2013.
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Czech Republic.

Trochim, W. M. K. (2002). The research methods knowledge base (2nd Ed.). Cornell University, NY, USA
Kothari, C.R. (1985), Research Methodology- Methods and Techniques, New Delhi, Wiley
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Research Standard Chartered Bank, Singapore Branch, 2014
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World Bank Report (2004): Making services work for poor people, 2004

Thank you
For your active listening and
understanding this research
Please ask as many questions as
needed!

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