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52  • The drivers of business competitiveness Education

Dating as far back as the Japanese occupation of 1895 to 1945, Taiwanese have valued and invested in education. That commitment continued after World War II, with the KMT steadily increasing education spending—from 8.6 percent of the national budget in 1950 to 19.1 percent in 1994. 77 With few natural resources on the island, Taiwan’s leaders quickly identified human capital as its most valuable asset. They worked to align secondary and higher education curricula with the skills that would prove useful in man- ufacturing. Along with direct aid, the United States assisted Taiwan’s industrial develop- ment by educating many budding engineers, technicians, and economists at American universities. Today, the island is experiencing some growing pains as it progresses from a manufac- turing-heavy economy to a more diverse market of expanding personal and professional services and a creative economy. This is partially the result of early-2000s education reform that “upgraded” several technical colleges to universities, resulting in “a mis- match of labor supply and job market demand.” 78 But that was not the case during Giant’s formative and expansion years. Responding to its growing export potential, Taiwan in the 1960s and 1970s emphasized and expanded its industry-focused education, including vocational education through nine years of mandatory schooling, an extensive junior college system, and technical institutes that provided instruction on industrial engineer- ing and innovation. 79 The nexus of Taiwan’s education and industrial policies accelerated the pace of innovation in order to stimulate export markets. More than half the country’s expen- ditures on research and development in the 1980s came from the public sector. 80 The Industrial Policy Research Institute played a prominent part. Founded in 1973, it helped wean Taiwan industry away from a dependence on US technology. Its capac- ity to do so coincided with Giant’s transition from low-cost vendor to American companies to manufacturer of self-branded, high-tech bikes. 81 From those humble beginnings, “Taiwan is now a supply and R&D center for the world’s high-end bicy- cles. And no other place in the world can compete—not even close,” Tony Lo proudly declared. 82 Culture Like many Taiwanese businesses, Giant started as an enterprise of family and friends. Undercapitalized, it followed Taiwan’s family-business culture, taking little risk, remain- ing flexible by engaging in short-term contracts, and relying on everyone in the house- hold to pitch in. 83 Many times, family members working in the factories were not paid for their labors. Instead, their contributions manifested in greater profits, which benefited the owner’s family as a whole. Taiwanese firms today have adopted many of the West’s aggressive marketing, innovation, competitive, growth-oriented traditions. But in the critical 1960s and 1970s, its business leaders were content to play the role of small, low- cost, anonymous suppliers to US and Japanese companies whose domestic labor costs were much higher. It was a strategy that suited them well. As contract manufacturers, Taiwanese firms—including Giant—were adept at conforming their plant operations to meet their customers’ needs. They adjusted production and implemented the client’s technologies and specifications quickly, saving the cost of marketing, retailing, and innovation. 84

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