Research Policy 31 (2002) 633–651

The origins and dynamics of Taiwan’s R&D consortia

John A. Mathews∗
Macquarie Graduate School of Management, Macquarie University, Sydney, NSW 2109, Australia
Received 21 December 2000; received in revised form 21 March 2001; accepted 21 May 2001

Abstract
A series of collaborative R&D ventures have emerged in Taiwan, within a quite distinctive institutional framework. Unlike
the case of many of the collaborative arrangements between established firms in the US, Europe or Japan, where mutual
risk reduction is frequently the driving influence, in the case of Taiwan it is technological learning, upgrading and catch-up
industry creation that is the object of the collaborative exercises. The Taiwan R&D alliances were formed hesitantly in
the 1980s, but have flourished in the 1990s as institutional forms have been found which encourage firms to cooperate in
raising their technological levels. Several alliances could be counted in Taiwan in the late 1990s, bringing together firms, and
public sector research institutes, with the added organizational input of trade associations, and catalytic financial assistance
from government. The article discusses the evolving organizational architecture of these R&D alliances, utilizing several
case studies, and seeks to draw comparisons between these institutional innovations in Taiwan and established collaborative
arrangements in the USA, Japan and Europe. © 2002 Elsevier Science B.V. All rights reserved.
Keywords: R&D consortia; R&D collaboration; Taiwan; Industrial upgrading; Technology diffusion and adaptation; State-business relations;
Economic learning; Institutional innovation and evolution

1. Introduction petitive position of at least one of the partners, and

As the costs and risks of research and development
mount, so firms in the industrial heartlands of the USA,
Europe and Japan have sought new organizational
forms to reduce and share these risks. Inter-firm R&D
collaborative alliances and consortia have flourished,
and with them new institutional foundations and facil-
itative mechanisms have been discovered (Evan and
Olk, 1990; Kleinknecht and Reijnen, 1992; Dodgson,
1993; Aldrich and Sasaki, 1995; Sakakibara, 1997a,b;
Dodgson, 2000). The common feature shared by all
such partnerships is that they influence the dynamics
of innovation in such a way that the future com-
∗ Tel.: +612-9850-6082; fax: +612-9850-9942;
URL: http://www.gsm.mq.edu.au/faculty/home/john.mathews
E-mail address: john.mathews@mq.edu.au (J.A. Mathews).
potentially of all the partners, is improved. The micro-
electronics, semiconductor and computer sectors have
been in the forefront of these developments, driven
by the Schumpeterian competitive dynamics of rapid
product turnover and diminishing process technology
life cycles that characterize these sectors. Govern-
ments have played key roles in the successful R&D
consortia in all the advanced countries—as in the
case of Sematech in the USA, in the VLSI and many
other joint R&D programs in Japan, and in ESPRIT,
EUREKA and other collaborative programs in Europe.
Public policies towards the framing of such consortia
are becoming more favorable (Martin, 1996). These
developments, whether they be called R&D alliances,
R&D consortia or strategic technology partnerships,
or simply collaborative innovation networks, are the
subject of a growing scholarly literature (Levy and

0048-7333/02/$ – see front matter © 2002 Elsevier Science B.V. All rights reserved.
PII: S 0 0 4 8 - 7 3 3 3 ( 0 1 ) 0 0 1 3 1 - 7
634 J.A. Mathews / Research Policy 31 (2002) 633–651
Samuels, 1991; Hagedoorn, 1996; Vonortas, 1997;
Hagedoorn et al., 2000).
Of great interest in this regard is the series of
collaborative R&D ventures that have emerged in
Taiwan, within a distinctive institutional framework.
Unlike the case of many of the collaborative arrange-
ments between established firms in the US, Europe or
Japan, where mutual risk reduction is frequently the
driving influence, in the case of Taiwan it is techno-
logical learning, upgrading and catch-up industry cre-
ation that is the object of the collaborative exercises.
Taiwan’s R&D consortia were formed hesitantly in
the 1980s, but flourished in the 1990s as institutional
forms were found which encourage firms to cooperate
in raising their technological levels to the point where
they can compete successfully in advanced technology
industries. Many of these alliances or consortia are in
the information technology sectors, covering personal
computers, work stations, multiprocessors and multi-
media, as well as a range of consumer products and
telecommunications and data switching systems and
products. But they have also emerged in other sectors
such as automotive engines, motor cycles, electric
vehicles, and now in the services and financial sector
as well. Several such alliances could be counted in
Taiwan in the late 1990s, bringing together firms, and
public sector research institutes, with the added or-
ganizational input of trade associations, and catalytic
financial assistance from government. The alliances
form an essential component of Taiwan’s national
system of innovation (Lin, 1994; Hou and Gee, 1993).
Taiwan’s high technology industrial success rests
on a capacity to leverage resources and pursue a strat-
egy of rapid catch-up. Its firms tap into advanced mar-
kets through various forms of contract manufacturing,
and are able to leverage new levels of technological
capability from these arrangements. This is an ad-
vanced form of “technological learning”, in which the
most significant players have not been giant firms (as
in Japan or Korea), but small and medium-sized enter-
prises whose entrepreneurial flexibility and adaptabil-
ity have been the key to their success. Underpinning
this success are the efforts of public sector research
and development institutes, such as Taiwan’s Indus-
trial Technology Research Institute (ITRI). Since its
founding in 1973 ITRI and its laboratories have acted
as a prime vehicle for the leveraging of advanced tech-
nologies from abroad, and for their rapid diffusion or
dissemination to Taiwan’s firms (Lin, 1994; Hobday,
1995; Wong, 1995; Mathews, 1997; Mathews and
Cho, 2000). This cooperation between public and
private sectors, to overcome the scale disadvantages
of Taiwan’s small firms, is a characteristic feature of
the country’s technological upgrading strategies, and
the creation of new high technology sectors such as
semiconductors.
It is Taiwan’s distinctive R&D consortia that
demonstrate most clearly the power of this public–
private cooperation, in one successful industry inter-
vention after another. Taiwan’s current dominance
of mobile (laptop) PCs for example, rests at least in
part on a public–private sector led consortium that
rushed a product to world markets in 1991. Taiwan’s
strong performance in communications products such
as data switches, which are used in PC networks,
similarly rests on a consortium which worked with
Taiwan’s public sector industry research organization,
ITRI, to produce a switch to match the Ethernet stan-
dard, in 1992/1993. When IBM introduced a new PC
based on its PowerPC microprocessor, in June 1995,
Taiwan firms exhibited a range of computing prod-
ucts based on the same processor just one day later.
Again this achievement rested on a carefully nurtured
R&D consortium involving both IBM and Motorola,
joint developers of the PowerPC microiprocessor, as
external parties (Mathews and Poon, 1995). Taiwan
is emerging as a player in the automotive industry,
particularly in the expanding China market, driven by
its development of a 1.2 l four-valve engine. Again,
this is the product of a public–private collaborative
research endeavor involving three companies, which
have now jointly created the Taiwan Engine Company
to produce the product. Thus, the R&D consortium
is an interfirm organizational form that Taiwan has
adapted to its own purposes as a vehicle for catch-up
industry creation and technological upgrading. The
microdynamics of the operation of these alliances or
consortia, is therefore a matter of some substantial
interest.
Some of these consortia have been more successful
than others—but all seem to have learned organiza-
tional lessons from the early cases where government
contributed all the funds, and research tasks were
formulated in generic and overly ambitious terms
for the companies to take advantage of them (Weiss
and Mathews, 1994). The more recent R&D alliances
 J.A. Mathews / Research Policy 31 (2002) 633–651
formed in the 1990s have been more focused, more
tightly organized and managed, and have involved
participant firms much more directly in co-developing
a core technology or new technological standard
which can be incorporated by the companies, through
adoption and adaptation, in their own products.
The basic model of the Taiwanese alliances is the
construction of a process in which R&D costs can
be shared, and risks reduced, through bringing many
small firms into a collaborative alliance with each
other and with ITRI (i.e. with one its operating lab-
oratories). It is ITRI which provides the anchor for
the alliance and the principal vehicle of technology
leverage. Thus, the Taiwan R&D alliances are similar
to their counterparts in North America, Europe and
Japan in their reliance on public sector laboratories to
provide the core institutional vehicle for R&D coop-
eration (Rush et al., 1996; Dodgson, 1997). But they
differ from their counterparts in the Triad countries
in that their goal is rapid adoption of new techno-
logical standards, products or processes developed
elsewhere, and their rapid diffusion to as many firms
as possible—rather than extending the envelope of
R&D (Freeman and Hagedoorn, 1994). The organiza-
tional form of the Taiwan alliances has evolved over
the course of the two decades in the 1980s and 1990s.
It owes much to the R&D collaborative vehicles
developed in the leading industrial centers, particu-
larly in the way that Japan structured many relatively
short-lived R&D alliances with clear technological
learning goals which in turn drew on earlier Euro-
pean examples (Sigurdson, 1998, 1986; Fransman,
1990/1992; Sakakibara, 1997a; Sakakibara, 1993).
Taiwan’s ability to fashion these consortia, and uti-
lize them to accelerate technological catch-up and
learning, is testament to the country’s institutional
capacity. The initiative for the formation of early
alliances came exclusively from the public agencies
(largely ITRI or the Ministry of Economic Affairs),
but the private sector has been taking an increasingly
active role as the institutional form of the consortia
has evolved, to the point where private firms were
taking the initiative in forming alliances by the end
of the 1990s (as in the case of electronic commerce).
Thus, the Taiwan R&D consortia pose an interesting
case for the study of government-business relations
and their evolution as an economy moves through
phases of technological imitation to innovation.
635
It should be pointed out that not all East Asian coun-
tries have been successful in forming research partner-
ships, despite overwhelming evidence of their efficacy
in the case of Japan’s catch-up efforts in the 1960s
and 1970s. They have been tried without great success
in Korea, while there have been few efforts to utilize
them in countries which have relied more heavily on
multinational investment, such as Singapore, Malaysia
and Thailand. In this sense, the Taiwan consortia rep-
resent a singular experience outside the scope of the
established collaborative arrangements in Japan, the
USA and Europe.
This article is based on a study of 20 of Taiwan’s
R&D alliances formed over the course of the past
15 years. 1 Since these consortia are not well known,
several representative case studies are given in the
paper, each framed around a discussion of the ratio-
nale for the formation of the alliance, its organization,
composition and processes, outcomes, and an assess-
ment of its relative success. 2 The cases are then
compared with what is known of successful R&D col-
laborative ventures in the USA, Europe and Japan, in
order to draw out the key features of the Taiwan R&D
alliances. The aim is to develop an evolutionary con-
ception of their organizational design, providing an
assessment in general of their effectiveness and modus
operandi.
The alliances studied, and the representative cases,
are displayed in Table 1, which illustrates the range of
consortia formed. It can be seen that they span many
industries and target technologies, and that they range
1 This study of Taiwan’s R&D alliances has been conducted
through field work carried out in November 1994, September 1995,
August 1996 and March 1997. Financial assistance has been pro-
vided by the Australian Research Council, and by the Business
Networks research program of the Department of Industry, Science
and Technology (in 1995–1996). Research assistance was pro-
vided by Teresa Shuk-ching Poon and Cathy Xu; some interviews
were conducted in conjunction with Professor Linda Weiss, Dr.
Wan-wen Chu and Dr. Shin-horng Chen. The assistance of officers
at the Industrial Technology Research Institute (ITRI), in particular
Dr. Otto Lin (former president), Dr. Chintay Shih (current pres-
ident) and Dr. Paul Bao-shiu Lin (deputy director of CCL), is
gratefully acknowledged.
2 The cases studied provide a substantially representative sample,
but certainly not the entire class of R&D consortia with which
ITRI has been involved, nor the still wider class of consortia
initiated by the private sector without ITRI involvement. Further
studies are needed to gain this more complete perspective on the
Taiwan experience.
636 J.A. Mathews / Research Policy 31 (2002) 633–651

Table 1
R&D alliances in Taiwan: 20 cases 1983–1997
Alliance Year(s) Companies Budget NT
$ million
(A) Electronics and information technology
1. PC 100 (IBM PC XT-compatible) 1983–1984 5 (9)b 40
2. PC 400 (IBM PC AT-compatible) 1984–1985 3 24
3. Workstation (Sun SPARC-compatible) 1989–1991 2 (3)b 150
4 Notebook Pca 1990–1991 46 100
5. Graphics terminal 1991–1993 34 (9)b 25
6. Palmtop PC 1991–1992 16 50
7. Pentium server 1991–1993 2 50
8 Taiwan NewPC (PowerPC)a 1993–1997 40 250
(B) Consumer electronics and communications
1. Ethernet switcha 1993–1996 5 (8)b 75
2. Digital loop carrier 1992–1994 3 (4)b 60
3. LCD consortium 1995–1997 4 230
4. HDTV 1994–1996 11 250
5 Interactive TV 1995–1997 21 200
6. V5 Network access standard >1996 12 150
7. High speed loop access system >1996 14 120
(C) Mechanical engineering/materials
1. 1.2 l enginea 1992–1997 4 (3)b 1400
2. Electric scootera 1991–1996 10 500
3. 250cm3 motorcycle engine >1996 2 600
(D) Software/services
1. Java-based Internet products >1996 24 250
2 Electronic commerce >1996 61 300
a Case study.
b Second-stage participation.

in size from as few as three or four participants to 2. R&D consortia

>40. One striking feature worthy of immediate notice
is their relatively small budgets. In all, the 20 consor-
tia have accounted for a budget of not more than NT$
4 billion, over 15 years, with government input of no
more than NT$ 2.3 billion—or around US$ 100 mil-
lion, equivalent to just one year’s government subsidy
of the 10 year Sematech program in the USA. 3 Thus,
these figures reveal just what a “David and Goliath”
struggle it has been for Taiwan to take on US firms in
high technology industries—and they underscore the
significance of the Taiwan achievements, which owe
as much to organizational finesse and learning as to
dollar subsidies.
3 On Sematech’s budget and its appropriation, see Sematech,
A World of Opportunity: 1996 Annual Report (Austin, TX:
Sematech, 1997).
The reasons why firms in the advanced countries
seek to pool their development efforts within R&D
consortia, and the nature of the benefits they derive,
is now the subject of a burgeoning international lit-
erature. The theoretical economic arguments (Spence,
1984; Katz and Ordover, 1990; Kamien et al., 1992)
tend to focus on the “spillover” effects of R&D, cre-
ating a socially useful externality. According to this
reasoning, firms enhance social welfare through their
research activities, but this may depress their incen-
tives to continue, unless a form of R&D collaboration
can internalize such an externality. These arguments
are of necessity couched in cost terms, with consortia
seen as pooling costs, and with the inevitable assump-
tions that vitiate much economic reasoning, e.g. that
cooperation either involves all firms in an industry or
 J.A. Mathews / Research Policy 31 (2002) 633–651
none (compared to the reality that cooperation usually
involves a small subset of firms). Empirical testing of
these points was scant until comprehensive microe-
conometric studies of Japan’s R&D consortia and US
consortia such as Sematech demonstrated clear bene-
fits to participants and to R&D expenditure levels gen-
erally (Branstetter and Sakakibara, 1997; Link et al.,
1996).
More comprehensive explanations for consortia
formation and governance have come from the institu-
tional economic literature and strategic management
literature. Here, the focus has been on matters such
as how firms formulate and achieve strategic goals
through the formation of research consortia (Vonortas,
1997; Martin, 1996; Link and Bauer, 1989); how
firms and agencies combine to enhance their resource
base (Mowery et al., 1998); and how they can ac-
tually manage the complex processes of building
inter-firm collaborative routines (Powell et al., 1996;
Sakakibara, 1997a,b; Doz et al., 2000; Sawhney and
Prandelli, 2000). These strategic goals include gaining
access to technical capabilities not otherwise easily
accessed, particularly complementary technological
resources, which generate new business opportunities
(Link and Bauer, 1989; Vonortas, 1997). The creation
of value through interorganizational relationships, and
the capturing of “relational advantage” has become
a topic for sustained inquiry (Saxenian, 1991; Dyer
and Singh, 1998; Child and Faulkner, 1998; Barringer
and Harrison, 2000). Small firms in particular have
been able to take advantage of R&D consortia in or-
der to overcome diseconomies of scale (Kleinknecht
and Reijnen, 1992; Sigurdson, 1998, 1986). 4 The
aim is to enhance the firms’ absorptive capacity, thus,
giving them potential access to a wider range of tech-
nological options (Cohen and Levinthal, 1989). This
provides an appropriate setting for the discussion of
Taiwan’s consortia, which have been designed to pro-
mote the interests of small and medium-sized firms
4 Sigurdson (1986) provides a wealth of detail on the origins of
Japan’s Engineering Research Associations (ERAs) which were
largely organized for the benefit of small firms. This makes the
best-known of Japan’s consortia, such as the VLSI consortium
1976–1979, an exception (Sakakibara, 1993; Sakakibara, 1997a).
The Japanese ERAs were actually an institutional adaptation of
Research Associations pioneered in Europe. Sigurdson’s mono-
graph has long been out of print, and was republished in edited
and updated form as Sigurdson (1998).
637
through the transfer and sharing of resources and the
collective enhancement of absorptive capacity.
2.1. Formation and operation of R&D consortia
In the case of R&D collaborative alliances and con-
sortia, the detailed case studies conducted to date re-
veal the immense difficulties that advanced firms face
in sustaining meaningful collaboration, even when the
payoffs are clear (Peck, 1986; Corey, 1997; Grindley
et al., 1994; Hausler et al., 1994; Luetz, 1997; Link,
1998). This provides a useful antidote to the economic
analysis, which seems to assume that consortia will
be formed when firms have interests in so doing. The
real world is much less tractable. This again is of great
relevance to the Taiwan case, where public agencies
have seen the issue in terms of creating an institutional
framework that will help to overcome firms’ antipathy
towards collaboration.
Three streams of research within the literature on
R&D consortia bear directly on the Taiwan case,
and bring out the factors involved in their success
or failure. First, when the research consortia have an
explicit goal of “technology transfer” and one of the
institutions, usually a public agency, plays a lead role,
these problems are not so acute. The term “cooper-
ative R&D agreements” (CRADAs) has been coined
to describe such a situation, and its efficacy in differ-
ent settings discussed (Berman, 1993; Bozeman and
Pandey, 1994; Rogers et al., 1998; Kumar and Magun,
1995; Abramson et al., 1997; Leyden and Link, 1999;
Carayannis and Alexander, 1999). The Taiwan R&D
consortia can be deemed to be a species of CRADA,
although joint development has become as much a
matter of concern in the 1990s as technology transfer.
Second, there is the issue of the goals of consor-
tia formation. Sakakibara (1994, 1997a,b) raised the
level of discussion of R&D consortia in her insis-
tence that many of the Japanese R&D collaborative
arrangements reflect motives of skill sharing rather
than cost reduction. She does not deny the impor-
tance of government subsidies, but argues that these
have the effect of inducing skill-sharing cooperation
rather than the costs themselves being a prime factor.
Her work rests on the resource-based view of the
development of strategic capabilities, and it provides
a framework of prima facie relevance for the case of
Taiwan’s alliances.
638 J.A. Mathews / Research Policy 31 (2002) 633–651
Third, there is the issue of the processes of consor-
tium formation and their triggering events. Doz et al.
(2000) provide a rich discussion of the institutional
details and motivations that inform the creation of
R&D consortia, utilizing as their sample the set of US
R&D consortia formed under the National Coopera-
tive Research Act of 1984, between the years 1984
and 1989. 5 Their focus is on the process of formation,
rather than on its triggering factors. This leads them to
propose two general kinds of processes, namely one
which is rationally engineered (usually by some trig-
gering agency), compared with one which emerges as
firms become aware of the feasibility and desirability
of pooling R&D efforts. Again this distinction appears
to have important application in the case of the Taiwan
consortia.
Overall, the burden of the empirical research is that
firms do indeed derive benefits from cooperating in
R&D, under certain circumstances (e.g. separability
of functions in the development task), and provided
the participants can find acceptable ways to answer
the three issues posed by Aldrich and Sasaki (1995),
namely:
• What kind of organizational arrangements work best
for each case?
• How are the research goals to be specified?
• What is to the involvement of government and pub-
lic agencies?
This present study will utilize these questions to
frame its analysis of the Taiwan experience with R&D
consortia, buttressed by the criteria introduced by
Sakakibara (cost-sharing versus skill-sharing motiva-
tions) and by Doz et al. (2000), namely, engineered
versus emergent formation of consortia. These five
questions will provide a convenient framework for
bringing out the essential organizational features of
the Taiwan alliances.
The goals then of the present study are to estab-
lish the practical relevance and interest of the Taiwan
consortia (i.e. adding further cases to the empirical
literature); to compare and contrast the Taiwan con-
sortia with those preceding them in Japan, Europe
and the USA (Hagedoorn et al., 2000); and to reach
5 This provides a population of 137 R&D consortia registered
under the Act. In 1994, the Act was amended, and the collection
of data was changed.
provisional findings as to the relative contribution that
the Taiwan consortia might have made to the devel-
opment and upgrading of new industries in Taiwan.
3. Origins of Taiwan’s development consortia
Like Taiwan’s industrial upgrading efforts more
generally, the R&D alliances are the fruit of ex-
perimentation and some early failures. Some of the
early R&D collaborative efforts, inspired no doubt
by Japanese cases such as the VLSI program of
1976–1979, were hardly successful. In the begin-
ning of the 1980s, the newly established Institute
for the Information Industry (III), for example, ini-
tiated a project called Software Engineering Envi-
ronment Development (SEED). This project brought
together 32 member firms and the agency with some
ambitious goals to establish technical standards for
Chinese-character word processing and software—but
in the end there was little to show for these efforts.
Likewise an early effort by ITRI to involve automo-
tive firms in the development of a two-stroke engine,
to provide a technological foundation for a mooted
Taiwanese automotive industry, was an almost com-
plete failure. But the characteristic feature of Taiwan
and its institutions is pragmatism and the ability to
learn from mistakes. These two failed R&D alliances
were certainly not the last word on the subject. 6 In
the 1980s and 1990s there were many more such ini-
tiatives, most of which can be traced to the various
research laboratories of ITRI—such as in electron-
ics (ERSO), computing and communications (CCL),
optoelectronics (OESL) or mechanical engineering
(MIRL).
The new crop of R&D consortia trace their ori-
gins to a series of “multi-client projects” initiated
by ITRI in the early 1980s, oriented towards stimu-
lating a personal computer (PC) industry in Taiwan.
Taiwan had missed out completely in mainframe
and mini-computers. But in the early 1980s, com-
puter engineers in ITRI’s electronics laboratory
(ERSO) were highly aware of the possibilities in the
new PC sector, based on the emergence of firms in
Taiwan in microprocessor-based product areas such
6 See Wang (1994) for a brief description of these two projects
and their shortcomings.
 J.A. Mathews / Research Policy 31 (2002) 633–651
as calculators, game machines and the early micro-
computers. The catalyst was IBM’s introduction of its
successful PC based on an open architecture, paving
the way to “IBM-compatible” machines. This cre-
ated an opportunity which Taiwan firms, led by the
youthful Acer, were quick to seize.
However, the Taiwan firms lacked basic PC tech-
nology, and turned to ITRI for support. At that time
the norm was for ITRI to develop new technologies
and then advertise their availability to existing firms;
or to develop the technology and then spin it off
into a new firm (as done with the first semiconductor
firm, UMC, in 1980). An alternative was to perform
contract work for individual companies, sometimes
merging into co-development work. A standard con-
tractual agreement for the development of a PC
was signed between the company Acer (then Multi-
tech) and ITRI/ERSO—but at the insistence of the
Ministry of Economic Affairs, which saw the poten-
tial for many Taiwan firms to become involved in
this emerging industry, the project was extended to
become a “multi-client project” thereby bringing in
other firms as well. This was the organizational pro-
totype of the R&D consortium. The idea was to seed
an industry rather than provide assistance to a single
firm. This initial effort had partial success, in devel-
oping a generic product standardized around certain
core components—but it was too late for the market,
and was plagued at the time by intellectual property
rights disputes.
The next chance came with IBM’s announce-
ment of the powerful new PC AT system in August
1984, which again featured open architecture and by
now standardized components, such as DOS operat-
ing system and Intel 286 microprocessor. This was
a technological leap that was eminently suited for
Taiwan’s fledgling PC firms, and for technological
imitation through the institutional vehicle of ERSO’s
multi-client project. No sooner was IBM’s new ma-
chine announced than ERSO moved to establish a
new multi-client project to develop a Taiwan version
of the PC AT, in October 1984. Three companies
were enrolled as participants. 7 Formal contracts were
signed in December 1984. A prototype machine was
7 These were Systek, Tatung and Copan. This was the project
through which Tatung, then a leading electronics firm in Taiwan,
made its entry into the PC business.
639
transferred to the companies by July 1985, less than
a year after IBM’s announcement, and brought to
market by the firms involved shortly thereafter. This
project was considered a great success, in terms of
the technology development and transfer, in terms
of compliance with all intellectual property require-
ments (an important development for the Taiwan PC
industry), and in terms of the business subsequently
generated for the participant firms, all of which be-
came leaders in the Taiwan IT industry.
The stage was now set for ITRI, and its newly es-
tablished Computing and Communications Laboratory
(CCL), to take the next step in upgrading Taiwan’s
technological capabilities beyond the simplest PCs.
Formal consortia were established in product areas
such as laptop PCs, workstations and high-end servers.
But the experience which was decisive in shaping the
organizational form of future consortia was that of the
Notebook PC consortium, which ran for a year and a
half, from 1990 to 1991.
3.1. The laptop PC consortium
The prospects for Taiwan companies in the new field
of Laptop PCs seemed remote, given the multiple pro-
prietary standards which were emerging, and the high
density of the product design and assembly process
(calling for different and more advanced skills than
those involved in producing desktop PCs). The CCL’s
senior officials saw this as an opportunity to develop a
further multi-client project, to give the industry greater
technological and commercial momentum. The idea
was to settle on certain key components as standard,
and help to build a mass production industry on this
basis.
A completely new organizational approach was
tried for this Notebook or Laptop PC project, marking
the point where the multi-client projects were being
recognized as genuine R&D alliances or consortia.
In this case, CCL developed draft specifications for
a “common machine architecture”, and announced
the new project to interested firms. The CCL negoti-
ated with the trade association, the Taiwan Electrical
Appliance Manufacturers’ Association (TEAMA),
to become involved as joint coordinator. 8 This may
8 Now known as the Taiwan Electrical and Electronic Manu-
facturers’ Association, TEEMA.
640 J.A. Mathews / Research Policy 31 (2002) 633–651
have seemed a small step at the time, but in organiza-
tional terms it represented a considerable enlargement
of the scope of the alliance—and an institutional
entrenchment of its legitimacy within the industry.
As things turned out, no fewer than 46 companies
elected to join the consortium—some clearly more
for informational purposes than for any serious in-
tention of manufacturing. 9 In July 1990, a formal
consortium was established, the Taiwan Laptop PC
Consortium (TLPC), with capital of NT$ 50 mil-
lion (just <US$ 2 million) subscribed by member
firms.
The overall strategy in the Laptop PC consortium
was for the CCL-led consortium to develop a “com-
mon machine architecture” for a prototype, which
would translate into a series of standardized com-
ponents that could be produced by Taiwanese man-
ufacturers through mass production. There was no
call for external sourcing of basic technology design,
since CCL had already some experience in devel-
oping a prototype in an earlier project with one of
the consortium members, Tatung. Organizationally,
the consortium formed several technical panels or
working parties, charged with the task of examining
each of these components, and investigating prospects
for local supply. These components included such
items as motherboard (and chipset); screen (LCD);
keyboard; battery; connectors; and adapters. In the
absence of a standardization decision, small Taiwan
producers of these components would be unable
to compete for the PC producers’ business against
Japanese, US or European suppliers. This was the
key institutional innovation of Laptop PC consor-
tium, which had the effect of translating what would
have been a “niche” product for Taiwanese manu-
facturers into a mass-produced product where Tai-
wanese manufacturing efficiencies could be brought
into play.
Once the serious engineering work began, the pro-
totype was produced rapidly and exhibited at the
Comdex computer show in the USA in 1990. Because
it was based on a series of standardization decisions,
the prototype was transferred rapidly into mass pro-
duction. Market sales took off rapidly, both in Taiwan
9 The initial entrance fee was set at only NT$ 1.2 million (around
US$ 40,000). A slightly higher fee of NT$ 1.8 million was set
for later entrants.
and abroad. The CCL followed up the earlier product
development work with extensive training programs
offered to engineers employed by consortium mem-
ber firms. Many of the CCL engineers also moved
across to the firms involved in producing Laptop PCs,
which was another form of diffusion of technological
capability. Thus, a notebook PC industry in Taiwan
was launched, thanks at least in part to the work
of this consortium. By the late 1990s, Taiwan had
emerged as the world’s leading supplier of notebook
PCs, with firms like Acer achieving global brand
status.
This successful aspect of the Laptop PC consor-
tium has to be set against negative features, which
prompted further learning and evaluation on the part
of the Taiwan agencies themselves. Principal defect of
the consortium was the large number of players (the
entry price had been set too low) and the fact that they
were presented with a finished product that was more
or less ready to be put into production. Several consor-
tium members thus found themselves selling virtually
identical products (given that the prototype had been
so close to a commercial product) and price competi-
tion rapidly became the main means for producers to
differentiate their products. This led to excessive com-
petitive pressures, and some of the less experienced PC
firms which had entered the industry via the alliance
exited, or went bankrupt. This was hardly a desirable
outcome. Further attempts to extend the alliance, to
produce a second generation Notebook PC, foundered
on the emerging differences between the manufac-
turers, and the formal consortium was disbanded
in 1991.
The Laptop PC consortium represented a water-
shed, indicating the potential of R&D consortia to
help establish new “fast follower” industries, but also
making it clear how carefully the organizational de-
tails and processes would need to be managed. The
stage was now set for a series of consortia formed in
the 1990s that learned the lessons from these earlier
experiences, and brought the Taiwan institutional ca-
pacities in mounting and managing R&D consortia
to a level comparable with those found in the ad-
vanced industrial countries. Of the many partnerships
formed, let us examine four that were typical, in a
variety of sectors, both in terms of their organization,
their technology targeting strategy, and their methods
of technology diffusion management.
 J.A. Mathews / Research Policy 31 (2002) 633–651
4. Case studies of Taiwan’s R&D alliances
in the 1990s
4.1. NewPC consortium (1993–1997)
4.1.1. Background and rationale
The Taiwan PC industry was very successful, due
in part to the ITRI consortia, but it limited itself
to “Wintel” architectures (i.e. those based on MS
Windows and Intel microprocessors). 10 There are
of course alternatives to the Windows-based archi-
tectures developed by Microsoft and Intel; one such
is the PowerPC microprocessor developed jointly by
IBM and Motorola and used by Apple. It made sense
for the Taiwan IT industry to develop capability in
the PowerPC architecture, for at least three reasons.
First, in case it took off and established itself as a
genuine alternative to Intel and Microsoft products;
second, in order to use the PowerPC platform as a way
of accessing Apple product platforms, which until
then had been inaccessible for Taiwan PC firms; and
third, as a way of diffusing capabilities in processor
architectures generally.
For their part, IBM and Motorola recognized the
significance of extending their global reach through
encouraging Taiwan IT firms to develop a range of
PowerPC-based information products. The IBM and
Motorola were therefore approached by CCL in 1992,
with a view to licensing the PowerPC to a group
of Taiwan PC firms. By dealing with ITRI/CCL in
a once-off licensing agreement, the US firms could
avoid having to deal with a lot of individual, small
Taiwanese companies. Negotiations over the charac-
ter of the technology transfer process were prolonged,
with a final agreement not being signed until late
1993. To show their commitment, the US firms jointly
established a PowerPC Technical Center in Taiwan
(the first outside the USA) in the period 1994–1996, to
provide technical assistance to Taiwan firms seeking
to adopt the PowerPC platform. 11
10 An exception was an attempt to enter the workstation segment
of the market on the basis of Sun SPARC-compatible machines,
in the late 1980s.
11 Apparently Digital Equipment Corp (DEC) also approached
ITRI/CCL with a view to licensing its Alpha processor, a rival to
the PowerPC. However, DEC was reportedly not willing to offer
the same level of technology support as IBM and Motorola, and
so their processor was not chosen for the NewPC consortium.
641
4.1.2. The consortium process
This was one of the more complex ITRI R&D
alliances, formed to promote a standard system plat-
form based on the PowerPC microprocessor. Tech-
nology transfer from IBM and Motorola was effected
through CCL, on behalf of Taiwanese firms generally,
in the form of a comprehensive licensing agreement.
This agreement set the terms of the development pro-
cess; it provided for development of products based
on the PowerPC processor, but not of the processor
itself. Thus, the consortium was designed to produce
PowerPC-based products as rapidly as possible. On
the original model of the Laptop PC consortium,
the NewPC consortium spanned several steps in the
system-product value chain, including production of
chipsets (platform), add-on cards, components and
software as well as final PC system producers. This
was a further organizational innovation, spanning sev-
eral steps in the value-chain, and making the NewPC
consortium considerably more complex than its pre-
decessors at ITRI. Given earlier experience with the
Laptop PC consortium, membership in each of the
working groups was limited to a maximum of nine
firms, to avoid excessive competition subsequently.
Thus, the alliances learn from each other, from one
generation to the next. Overall 40 companies were
involved. The structure of the consortium is shown
in Scheme 1.
The NewPC consortium was formally established
between CCL and the 40 participating firms, in
November 1993, following the signing of a Memo-
randum of Understanding (MoU) between CCL and
IBM in July 1993. Product development proceeded
rapidly, overseen by the Platform working group, un-
der the technical advice of IBM and Motorola who
placed representatives in Taiwan. A motherboard built
around the PowerPC was exhibited by CCL at the
CeBIT trade fair in Hanover, to considerable acclaim.
It was followed by a fully functioning PC system
based on a PowerPC 601 motherboard, exhibited at
the June 1994 Computer Show in Taipei. This was
just a day after IBM had announced its own first PC
based on the PowerPC 601.
A subsequent phase was focused on extending
the market opportunities for Taiwanese firms. It
was initiated with the signing of an agreement be-
tween CCL and Apple to open up its operating
system for licensing by Taiwanese firms, in January
642 J.A. Mathews / Research Policy 31 (2002) 633–651
Scheme 1. The structure of the NewPC consortium.
1995. 12 This was followed by an agreement between
CCL and IBM to license IBM’s PowerPC system
firmware to Taiwan producers (in addition to the
hardware already licensed). This opened the way for
Taiwan firms to produce their own PC systems based
on PowerPC platforms, utilizing Apple and IBM
software and firmware and “shaping” their product
offerings with their own software refinements. All the
funds needed for development of the NewPC consor-
tium products were provided by member companies,
through their contributions. 13 It represented a “com-
ing of age” where the consortia were expected to be
financially self-supporting.
4.1.3. Consortium outcome
By March 1997, two Taiwanese firms—Umax and
Tatung—had developed product lines based on Pow-
erPC platforms, and licensed PowerPC-compatible
software from IBM, Motorola and Apple. Umax led
the way with its licensing of Apple hardware and
software rights, and its production of PowerMac PCs
in Taiwan. Since then other IT products have been
produced based on the PowerPC processor rather
than the conventional “Wintel” systems. Of course,
as things turned out, the PowerPC processor did not
displace the Intel-Microsoft system dominance, and
12 Apple had never before opened its operating system to
licensing—a momentous decision.
13 These increased as the project evolved—from NT$ 1 million
in Phases 1 and 2, to NT$ 2 million in Phase 3. Thus, the total
budget was over NT$ 100 million (around US$ 5 million). Apart
from CCL’s “in-kind” contributions, in terms of engineering input,
there was no external public funding of the NewPC consortium.
so the business success of these Taiwan product of-
ferings has not been great—apart from the Apple
cloning, which was growing fast in the later 1990s.
Some leading companies such as Acer did not join—
presumably for fear of offending Intel. 14 Thus, the
consortium must be rated a qualified success.
But there were several highly significant indirect ef-
fects. It equipped major firms with the technological
capabilities to develop products based on a major mi-
croprocessor, and gave them insights into the workings
of the operating systems based on this processor. It
generated profitable product lines for the companies,
both through their own PowerPC-based products and
through the opening up of Apple PowerBook clones.
It raised the international profile of the Taiwan PC in-
dustry so that it was seen to be a player in the tech-
nological development of the sector.
4.2. Ethernet data switch (1992–1996)
4.2.1. Background and rationale
The 1980s saw the emergence of computer net-
works, and with them digital data transmission
systems based on new data architectures. Ethernet
(developed originally at Xerox PARC) was the dom-
inant open standard by the end of the 1980s. Taiwan
firms were quick to become involved in these tech-
nologies, with the assistance of ERSO. For example
Accton (an unofficial ERSO spin-off of 1988) was
14 Other participants kept a low profile for similar reasons; for ex-
ample, First International Computer participated via its subsidiary,
Formosa Industrial Computing, while Umax sent its subsidiary,
Prolab Technology, to the software working group.
 J.A. Mathews / Research Policy 31 (2002) 633–651
an early participant with its ‘Etherhub’ products,
while D-Link also emerged as a specialist supplier.
In the 1990s, computer networks became sufficiently
complex that switching systems needed to be intro-
duced, together with drastically increased capacity
‘bandwidth’ for data flow. This represented a ‘quan-
tum leap’ in data network technology which it was
essential for Taiwan firms to master if they were to
be industry players. So CCL took the initiative in
acquiring the data switching technology, and forming
a consortium for its dissemination.
4.2.2. Consortium process
The technological core of the emerging Ethernet
switch technology was threefold: (a) a set of open Eth-
ernet standards themselves (as published by IEEE in
the USA); (b) a chipset embodying these standards;
and (c) hardware providing the physical switching link
between computers. In 1992, CCL initiated a project
to build-up technological capability in these three ar-
eas, and accelerate its diffusion to private firms. No
external source of technology transfer was needed in
this case, as Ethernet technology had previously been
mastered (e.g. through the earlier Ethernet hub-based
systems).
In 1993, CCL let the industry know of this project,
and established joint administrative arrangements with
the trade association, TEAMA. At various stages be-
tween five and eight companies were involved, some
of which were relatively new to the industry. 15 This
is a characteristic of the Taiwan consortia, one of
whose aims is to ensure that there are always new en-
trants coming into technologically demanding indus-
tries. This is a distinctive characteristic, and one where
Taiwan differs from the Japanese experience.
The first versions of the Ethernet switch were em-
bodied in a customizable chipset, later reduced to a
single Application Specific chip (ASIC) that could
be manufactured locally by Taiwanese IC firms. Con-
densing the chipset to a single chip was the critical
technology challenge—spurred by US companies such
15 Initially five companies enrolled in a product development con-
sortium: D-Link; Accton; CNet; RPTI and Long Shine. Of these,
D-Link and Accton already had prior technological capabilities,
which they wished to extend and upgrade through this project.
Three further companies joined the project at a later date. Long
Shine later dropped out, due to financial difficulties not linked to
the project.
643
as VLSI Technology that led the way with this kind of
innovation. The CCL used its own funds to develop the
ASICs, on the ‘fast follower’ strategy, and provided
them for a fee to the Taiwan industry. The consortium
participants took over this technology, and developed
their own adapted or improved versions of the ASIC
technology for themselves.
4.2.3. Outcome
This was one of ITRI’s most successful R&D
alliances. The data switching business based on Eth-
ernet standards has been growing fast world-wide in
the 1990s, and Taiwan has produced at least two lead-
ing specialist suppliers, in Accton and D-Link. Both
companies were internationally successful at the end
of the 1990s, and both benefited considerably from
their involvement in the CCL alliance(s). Accton in
the mid 1990s embodied its own ASIC chips in Eth-
ernet switch products, such as its ‘backbone switches’
and ‘segment switches’. These are profitable, high
value-adding products that represent a considerable
advance on Taiwan’s accustomed role as supplier of
the least value-adding components in high technol-
ogy systems. The MoEA-funded phase of this project
ended in 1996. After that CCL continued to maintain
and develop its own expertise, further improving its
ASICs, and developing expertise in rival technologies
to that of Ethernet, such as ATM standards. 16 This
led to continuing close relations between CCL and
the companies—one of the less visible outcomes of
successful R&D alliances.
4.3. Four-cylinder automotive engine (1992–1997)
4.3.1. Background and rationale
The automotive industry in Taiwan has been char-
acterized by a large number of participants each of
which is quite small and incapable of making the in-
vestment needed to develop self-sufficiency in critical
components like engines and powertrains. 17 The in-
dustry was based mainly on local companies—China
16 Asynchronous Transfer Mode (ATM) standards represent a rival
for Ethernet switching standards for intra-network operation. At
the time of the study (1996–1997) CCL was developing a new
project designed to develop an ATM Internet switch, thus, giving
Taiwan firms technical competence in both standards.
17 There were 11 companies in the early 1990s producing 400,000
cars a year, i.e. on average only 40,000 each.
644 J.A. Mathews / Research Policy 31 (2002) 633–651
Motor Co. (CMC), Yulon Motor Co. (YMC) and San
Yang Motor (SYM)—which teamed up with Japanese
partners to assemble and market their vehicles. 18
Some success had been achieved in developing local
branded products, such as the VARICA van and small
delivery truck line produced by CMC, which used a
Japanese 1 l engine. But efforts to develop the core
engine and powertrain components by these firms
have been frustrated—and some attempts, as in the
case of the Yulon group’s “Feling” branded car, with
its own engine, failed in the marketplace. 19 Thus, by
the 1990s the automotive companies were anxious to
find a way to develop their own capabilities in the core
components of engine and powertrain. The driving in-
fluences were, firstly their own desire to become fully
fledged automotive companies; the prospects of the
opening China market, from which they would likely
be excluded if they did not have their own components;
and the looming prospects of tariff protection being
wound back under GATT and then WTO rules. Thus,
the three companies were prepared to find common
ground through their trade association, the Taiwan
automotive industry association (the TTVMA), which
made an approach to the government and ITRI
in 1990.
4.3.2. Consortium process
The project was initiated at the instigation of
the TTVMA, whose members (and particularly the
CMC) would provide the customers for a collabora-
tively developed engine. Thus, this was a relatively
simple—albeit large and important—consortium,
where the participants were clearly identified, and
the expected market for the product was foreseen.
The years 1991 and 1992 saw ITRI/MIRL undertake
a feasibility study, in which a group of engineers
from the companies and ITRI undertook overseas
study missions. They identified three leading engine
companies as potential sources of technology: Lo-
tus (UK) then independent, but subsequently taken
over; Porsche (Germany) and Ricardo (UK). In the
end, Lotus made the most attractive offer. A formal
18 CMC has a 35% equity tie-up with Mitsubishi Motor; YMC
a 25% tie-up with Nissan; and SYM likewise a 25% tie-up with
Honda.
19 The Feling car had a fuel injection engine upgraded by YMC
from a Nissan carburetor engine.
Technical Assistance Agreement (TAA) was signed
between ITRI/MIRL and Lotus in January 1992.
The consortium got underway at once. In an initial
phase, Lotus provided training to the four companies’
and ITRI’s engineers and developed more precise
specifications for the engine. In Phase 2, the engine
design was completed and simulated, largely in the
UK, and in Phase 3, the engine was actually built and
tested at the MIRL laboratories in Taiwan. In this latter
phase, there were up to 80 engineers working on the
project within MIRL, plus 20 from the companies—
so that the project was by far the largest undertaken
within MIRL, and dominated the life of the Power
Machinery Division for 3 years. A prototype engine
was produced in record time—by the end of 1993. 20
At the beginning of 1994, the prototype engine was
passed to the four company participants. Rather than
each company then seeking to develop and commer-
cialize the engine on its own, a proposal to form a joint
(common) engine company was mooted. This was a
momentous proposal, that promised to put the Taiwan
automotive industry on the solid technical foundations
that had been sought but not attained over the previous
two decades. The companies studied this proposal for
18 months (while undertaking their own market and
technology feasibility studies) and eventually agreed
to form the joint engine company in July 1995. The
consortium successfully launched the China Engine
Corporation (CEC) in 1995, and it became operational
in 1996. 21 The venture was capitalized to a level of
20 The leader of the project was Dr. J.P.H. Shu, who had lengthy
prior experience in the USA working with NASA and Ford Motor
in Michigan. He was able to call on his world-wide network of
contacts to provide the essential technical input for the project’s
success—the TTA with Lotus, and the supporting TTAs with
such companies as Riteway (pistons); A.L. Dunn (diecasting
of cylinder head); Bando (belting); three Bond (sealants) and
Litens (tensioner). These are all world leaders in the automotive
components industry, and their involvement in the project has
been critical to its success. Indeed it was the absence of such
international linkages with leading suppliers that accounts for the
failure of earlier intra-company engine development efforts such
as Yulon’s “Feling” project.
21 The consortium members, CMC, YMC and SYM each took
20% equity, with financial institutions taking 35% (Chiaotung Bank
15%, and the China Development Fund 20%), and an auto parts
manufacturer, Sengton Transportation Implements Co. taking the
remaining 5%. Yu Tien, while a member of the consortium faced
financial difficulties and was not an equity holder in the China
Engine Corporation (Hua-Chin Machinery Co.)
 J.A. Mathews / Research Policy 31 (2002) 633–651
US$ 60 million (which again illustrates the tiny scale
of the Taiwanese industry initiatives compared with
their counterparts in Europe, the US and Japan). The
company’s initial plans were to produce a 1.2 l, four
cylinder, eight-valve gasoline engine. The first engines
of commercial standard were produced early in 1997,
and were being exported into the China market in the
same year. 22 The prospects for CEC engines, and ve-
hicles built with CEC engines in China, appear to be
promising.
4.3.3. Outcome
This was by Taiwan standards a large project, with
a total budget of around NT$ 1.4 billion (US$ 50
million). Over the course of the project, there were
equal contributions from government and industry—
with the MoEA providing over 80% of the budget
initially, and the companies increasing their share
(and commitment) as the project progressed. The
companies had to put up NT$ 50 million (i.e. around
US$ 2 million) each to participate in the project.
This was a relatively small sum for the profitable
automotive companies, with a potentially very large
return for them if the project succeeded and opened
up the China market as a result. This consortium ap-
pears to have been remarkably successful in lifting
the collective technological capability of the Taiwan
automotive industry to encompass the critical compo-
nents of engines and powertrains (which follow rela-
tively simply in the wake of the engine). All three of
the main automotive industry vehicle producers have
participated, and have avoided costly competition
through collaborating in a project which was beyond
each of them and only possible through a collective
effort. 23
22 China Motor utilized the locally made engine initially in its
popular mini pickup vehicle, previously powered by a Mitsubishi
engine. The Yulon group formed a joint venture in China—the
South West Motor Company—with full PRC approval, to estab-
lish an engine plant with a capacity of 150,000 units per year,
i.e. twice the expected capacity of the CEC in Taiwan. This was
the first engine plant established in the PRC other than through
simple technology transfer by a western multinational corpo-
ration.
23 Had one of the Japanese companies offered technology transfer
to one of the Taiwan companies, the result would have been rather
different.
645
4.4. Electric scooter 1991–1996
4.4.1. Background and rationale
The motorcycle industry has grown rapidly in
Taiwan, along with increasing usage of motorcycles
in cities as a means of personal transport. This has
also become a major source of air pollution—if not
the dominant source, at least in the cities themselves.
Thus, there is great pressure to develop alternative
urban transport systems, such as metro systems—and
electric vehicles. The Taiwan Environmental Pro-
tection Agency (EPA) maintained this pressure by
issuing stringent emission controls on motorcycle
exhausts (stepwise reductions in allowable levels of
carbon monoxide and nitrogen oxides in 1988; 1991;
and 1998), and requiring that 2% of sales of motor-
cycles by the year 2000 be electric vehicles. This
in itself created the impetus for a new industry with
both domestic and export prospects—protected by
the emission controls which constitute very effective
non-tariff trade barriers. Thus, the Energy Committee
of the MoEA targeted an electric motorcycle as a
strategic product, and part-funded the formation of a
new consortium to produce such a vehicle.
4.4.2. Consortium process
The participants in this consortium were drawn
from three major parties: government agencies—
ITRI/MIRL (MoEA); the industry association—the
Taiwan Transportation Vehicle Manufacturers Asso-
ciation (TTVMA); and 10 companies, comprising 6
motorcycle companies and 4 components companies,
again spanning several stages in the value chain. 24
This consortium was initiated in 1990 by the Energy
Committee of the MoEA, with a feasibility study. A
formal consortium was formed in 1992, named ZES
2000 (after “zero emission vehicle”) and ITRI/MIRL
produced a prototype vehicle, the EC1, in 1996. 25
Engineering options were chosen from the perspective
of local supply and market accessibility (for exam-
ple, lead acid batteries were adopted because of their
24 The motorcycle companies included Kwang Yang (Kymco); San
Yang; Taiwan Yamaha (the three largest, accounting for 90% of
sales in Taiwan); Taiwan Suzuki and Giant Yeh. The components
companies encompassed firms involved in electric motors and con-
trols (Shih Lin; Taigene); and batteries (GS; Walsin Technology).
25 The vehicle is named after the MoEA Energy Committee, which
drove the project.
646 J.A. Mathews / Research Policy 31 (2002) 633–651
availability, leaving more sophisticated batteries to a
later stage). The consortium involved an advanced or-
ganizational design, in that it spanned several phases
of the value chain in producing an electric scooter—
namely, batteries, electric motor and final vehicle as-
sembly.
This project was driven by market considerations
all along, and was unusual in that it involved cus-
tomer surveys conducted to ascertain the likely ac-
ceptance of an electric vehicle produced. The project
took a local 50 cm3 scooter as benchmark, and adapted
it to improve its electrical and mechanical efficiency;
increase its battery density and capacity; reduce the
scooter weight and drag characteristics; and improve
the scooter’s reliability and safety. Design of a prod-
uct for ease of mass manufacture was a constant fac-
tor. A 6 month test program was initiated at ITRI in
July 1995. 26 ITRI/MIRL continued with further de-
velopment work, for example to extend the charging
cycle time (giving scooter riders a longer ride between
battery recharging sessions) with a higher density bat-
tery such as the EV battery. This resulted in significant
changes being made to the propulsion system. Thus,
ITRI/MIRL continued to improve the prototype, thus,
minimizing the product engineering costs to be borne
by the scooter companies if and when they made a de-
cision to produce a commercial version of the scooter
themselves. A prototype product, the EC-1, was passed
to the consortium members in 1996/1997, who then as-
sessed their technical and marketing options. A further
prototype, EC-2, was produced in 1998, after further
testing by the EPA for compliance with cleanliness
standards.
The companies involved have been pouring re-
sources into their own development efforts, demon-
strating that their involvement in the consortium
enhances rather than depresses their R&D efforts.
Kwang Yang Motor Co., now Taiwan’s leading motor
cycle producer, announced its intention to launch a
new all-electric powered scooter based on the ITRI
prototype at the end of 1998. It established a new
26 Over 30 ITRI employees volunteered to drive the ZES 2000
scooter and log their responses on controlled questionnaire forms
each week. The test vehicle was rated well for smoothness of ride,
low noise and zero exhaust emission; most found the long hours
required for charging the battery overnight as acceptable, while
some objected to the low acceleration capabilities of the vehicle.
EV subsidiary, recruited specialist staff, and entered
into its series of collaborative agreements. 27 These
efforts culminated in the launch in 1999 of its first
commercial model, the AIR.
Kwang Yang and San Yang teamed up with the
other members of the consortium to form a joint R&D
Center in Taipei which will provide common sup-
port for the emerging electric-powered scooter indus-
try. 28 Thus, the initiative has passed to the private
sector—which has all along been the goal of these
ITRI-sponsored projects. By the end of the 1990s
three companies had emerged in Taiwan as suppliers
of electric-powered scooters—Kwang Yang (with its
AIR model), Shang Wei EV Technology Inc., and Che
Mong Electric Motor Company.
4.4.3. Assessment
This has turned out to be one of the most prescient
and ambitious of the ITRI-MoEA organized consor-
tia, with the clear goal of creating a new industry
focused on a 21st century market, not just in Tai-
wan but around the world. The MoEA has played its
role in “shaping” the emergence of a market by judi-
cious incentives. 29 ITRI/MIRL led the way with the
development of a consumer-friendly prototype, and
the promotion of Taiwan-based components supplies.
The market creation initiatives focus on potential
bottlenecks, such as the issue of battery charging. 30
27 It licensed technology from the US firm Unique Mobility Inc.
(UQM) and in 1998 formed a strategic alliance with the US-based
Electric Vehicle Global Motors Co. (EVGM), founded by former
Chrysler chairman Lee Iacocca.
28 Initial capital of NT$ 200 million (US$ 6 million) was sub-
scribed by all participants to the new joint venture, Sam Ever
Industry Co. It has plans to produce its own vehicle, the Ever.
29 The MoEA continued to offer supporting incentives, this time
in the form of an ‘environmental subsidy’ of between NT$ 16,000
and 20,000 on a new machine, which consequently can be priced
very competitively at around NT$ 40,000. In this way, the MoEA
was deliberately shaping the market for this emergent product, on
the grounds of social desirability as well as industry promotion.
30 One option being considered by the government in the late
1990s was an infrastructure where batteries are owned and operated
(i.e. charged, stored and recharged) by a utility, e.g. TaiPower, and
leased to motor cyclists. In this system, cyclists could deposit their
used batteries at depots located in or near petrol service stations,
and pick up a freshly charged battery. Such an infrastructure system
would greatly enhance the attractiveness of the electric vehicle
(eliminating the need for overnight battery charging at home, and
extending the driving range of scooters virtually without limit—
similar to the case for gasoline-driven vehicles now).
 J.A. Mathews / Research Policy 31 (2002) 633–651
The most positive assessment is that Taiwan has
emerged at the opening of the 21st century with a
highly developed electric-powered vehicle industry.
The export prospects for such electric scooters would
be expected to improve rapidly in the 21st century, as
emission controls in polluted cities are implemented,
and as countries like China and India switch from
manual bicycle transport to motorcycle transport. A
negative assessment would be that the consortium has
moved ahead of the capacity or the willingness of the
private sector to introduce such electric scooters to the
market. No final judgment on this point is possible as
yet.
5. Benefits conferred by the Taiwan
R&D consortia
Let us now draw on these case studies to develop
a more general understanding of the workings of
these R&D consortia in Taiwan, in comparison with
those that operate in the USA, Europe and Japan.
The pattern of the Taiwan alliances is that a group
of firms join with ITRI to establish capability in a
new technology or new set of standards for an ex-
isting technology. The alliances have evolved from
a fairly simple organizational structure, where ITRI
identifies the technological issues and develops the
specifications and prototype, and hands this over to
interested firms; to one where there is a lengthy pro-
cess of co-development between ITRI and partner
firms, spanning several stages in the value chain,
and involving development work being conducted
partly within ITRI and partly within the firms them-
selves. The role of the firms has evolved from their
being fairly passive recipients, to co-developers (and
co-funders) to the point where firms themselves are
taking the initiative. 31
All the models involve ITRI securing access to
a new technology on behalf of Taiwanese firms—
usually a technology source located overseas, in the
USA, Japan or Europe. This is common to the oper-
ation of all the R&D alliance organizational forms.
31 Very recent consortia, such as SET (Secure Electronic Trans-
mission) in the finance sector, and ASTRO (Advanced Semi-
conductor Technology Research Organization) have been formed
entirely at the instigation of the private sector, with ITRI labora-
tories playing a monitoring role.
647
The ITRI thereby acts as the “vehicle” or gateway for
Taiwanese firms to access a technology that would
otherwise be beyond them. At the same time, it of-
fers a single point of contact for a large advanced
firm (such as IBM or Intel or Sun Microsystems) that
can license its technology to Taiwanese firms without
having to deal with many small firms simultaneously.
The consortia, therefore, are of mutual benefit. The
key issues involved in forming these alliances are not
so much whether they provide benefits, which may
be taken as given, but how the difficulties involved in
securing cooperation between otherwise competing
firms are identified and overcome.
We frame our discussion of the Taiwan consortia
around five questions: the three questions posed by
Aldrich and Sasaki (1995) in relation to Japanese and
US R&D consortia, the issue of cost-sharing versus
skill-sharing (Sakakibara, 1997a,b); and the issue of
the formation of consortia being engineered or emerg-
ing from the needs of the firms themselves (Doz et al.,
2000).
5.1. What kinds of administrative arrangements
are utilized to effect the inter-firm collaboration?
The available models are those of formal incor-
porated cooperative entities, such as the Engineering
Research Associations (ERAs) of Japan, or formal
joint ventures, with much of the research being done
in joint facilities, or a looser arrangement with the
participant firms themselves conducting most of the
research and sharing the results. The Taiwan consortia
are at the latter end of the spectrum. They have made
heavy utilization of the public sector laboratories of
ITRI as prime instigator of the consortia, initially
conducting all the work and passing it across to par-
ticipant firms (technology transfer). In the 1990s,
this has evolved to an arrangement where the ITRI
laboratory acts as convenor and coordinator of the
project, but the development work is done jointly
in participant firms’ laboratories as well as in ITRI.
Thus, there is a progression towards the private sector
playing an increasingly active role in the consortia.
However, there is no incorporated research entity, and
no equity participation by the consortium members—
other than in the case of the China Engine Company
that emerged after the successful conclusion of the
research consortium. Moreover, the Taiwan consortia
648 J.A. Mathews / Research Policy 31 (2002) 633–651
are distinctive in enrolling industry associations as
joint convenors, in recognition of the superior indus-
try contacts of the association. It is the embodiment
of the consortium in a neutral party, namely the ITRI
laboratory, that helps to account for the firms being
able to work cooperatively and productively on a spe-
cific project while remaining competitors elsewhere.
5.2. How are compatible research goals
jointly identified?
The issue here is whether the consortium works on
generic technology issues, or on specifically targeted
projects, and how this is decided. In the case of the
Taiwan consortia, it is very much the case that the
goals are quite specific and well-defined, such as to
develop a prototype laptop PC, or CD-ROM drive, or
set-top box for interactive video. This is because the
Taiwan consortia are largely conceived as instruments
of catch-up, targeting known technologies and stan-
dards. The case of components and their standardiza-
tion illustrates the approach taken. One of the hidden
barriers to entry into a new field for small companies
like those found in Taiwan is that they cannot standard-
ize on components and thereby strike a good deal with
potential suppliers. Collective measures are needed
to overcome these diseconomies of scale. The R&D
alliance can solve this problem by making the compo-
nent selections (i.e. standardizing on certain compo-
nents and not on others) and then negotiating supply
agreements with vendors on behalf of the firms as a
group. This approach enabled the Laptop PC consor-
tium, for example, to transform what would have been
a “niche product” into a standardized product suitable
for mass production. This is a subtle but effective way
of accelerating diffusion of an innovation, and of gen-
erating national competitive advantages where at the
outset there appear to be none available. Overall then,
it is the catch-up character of the short-lived Taiwan
R&D alliances that enables them to resolve the issues
of technological strategic direction relatively easily.
5.3. How much involvement is allowed
for government and public agencies?
The issue here is whether the public sector or private
sector leads in consortium formation and management,
and the degree of financial contribution made from
public sources. In the case of the Taiwan consortia,
given their strategic goals of technological catch-up,
their formation and governance is a matter of public
sector leadership. In some cases, it is the Ministry of
Economic Affairs itself which takes the initiative, par-
ticularly where there are “market shaping” issues in-
volved (as in the case of the electric-powered scooter
and the motor cycle engine). In other cases, it is ITRI
that is vested with the responsibility for setting a tech-
nological lead. It is ITRI working in consultation with
the industry that identifies a feasible goal and then in
association with the industry organization assembles a
relevant group of firms to achieve it. The consortium
is conceived as a transient entity, and is disbanded as
soon as the goals have been achieved. Perhaps for this
reason the Taiwan research partnerships have not yet
involved participation by universities, which are com-
mon participants in longer-lived research partnerships
in Europe and North America (Hagedoorn, Link and
Vonortas, 2000).
5.4. Are the consortia cost-sharing or
skills-sharing in organizational design?
The Taiwan consortia are created to accelerate the
diffusion of technological capabilities across indus-
tries. In other words, they are instruments of economic
learning, like their predecessors in Japan. While costs
are a consideration, they are marginal compared with
the learning benefits conferred on participant firms.
This is demonstrated in the impact of consortium
membership on firms’ R&D expenditures. Far from
firms learning to economize on R&D expenditure
through joining R&D consortia (a common assump-
tion in the economics literature) the experience in
Taiwan indicates that firms rapidly acquire a taste for
R&D and an appreciation of its competitive benefits
through participating in alliances. They thereby tend
to increase the scale of their own R&D activities, even
as they participate in the alliances, thereby enhancing
their own absorptive capacity (Cohen and Levinthal,
1989). This is what may be termed the “innovation
effect” of the alliances. 32 It is enhanced as firms
32 Sakakibara (1994, 1997b) demonstrated such an effect in the
case of Japanese consortia; she later quantified it as one of the
demonstrable benefits of firms’ participation in R&D consortia
(Branstetter and Sakakibara, 1997).
 J.A. Mathews / Research Policy 31 (2002) 633–651
conduct more and more of the development work
within their own facilities—which is one of the rea-
sons why this trend is encouraged in Taiwan by ITRI.
5.5. Are the consortia formed following an
engineered process or an emergent process?
The Taiwan consortia are formed for eminently
pragmatic reasons of technology catch-up through ac-
celerated diffusion of technological capabilities, and
in this sense they are formed through hard-edged en-
gineered processes. But there is no coercion involved.
Participation by firms is entirely voluntary. Finan-
cial and knowledge-diffusing incentives are carefully
structured to ensure that firms see it as being in their
interests to participate. This is another illustration of
the basic principle that in Taiwan—as in Japan—it is
not assumed that firms are willing to work together
in collaborative processes. Rather it is the case that
institutional frameworks are constructed within which
firms find it to be in their interests to collaborate on
specific projects, while remaining fierce competitors
in other markets. Moreover, the Taiwan consortia are
not closed to emergent possibilities, either within the
lifetime of the consortium, or from consortium to
consortium; this is the flexible aspect of their pragma-
tism. Moreover, the public sector instigated consortia
have led to the formation of private sector consortia
which are starting to show signs of emergent forma-
tion processes. There is an evolutionary process of
institutional variation and selection at work.
Overall then, the finding of this study is that
Taiwan’s R&D consortia have indeed made a positive
contribution to Taiwan’s industry development and
upgrading—along with other institutional innovations
and of course the contributions of private firms them-
selves. They have contributed to the development
of Taiwan’s social capital (Cooke and Wills, 1999)
insofar as they have established a replicable organiza-
tional form adapted to the purposes of technological
learning and diffusion.
Of course, not all the Taiwan R&D alliances have
been successful. Some have been failures in terms of
their own goals and targets. Some have been unsuc-
cessful, not because of lack of effort or coordination
on the part of the member firms, but because the
world did not behave as expected, or a market did
not develop as expected (as in the case of the HDTV
649
consortium, and the graphics terminal consortium). In
other cases, consortia have been unsuccessful because
of lack of supporting infrastructure: for example in
the case of efforts to launch laser fax machines and
hard disc drives. Here, the problem was not so much
the alliance itself as the lack of a rich network of
precision engineering and machinery firms needed to
sustain such industries. Sometimes efforts to mount
them have been unsuccessful because of opposition
from Taiwan’s own incumbents—as in the case of
early efforts to kickstart Taiwan’s optoelectronics
industry (Linden et al., 1997). 33
Yet even where R&D alliances in Taiwan have
been less than successful, they have contributed their
experience and this has been absorbed and applied
in the design and implementation of future alliances.
Thus, the Laptop PC consortium was recognized as
clearly having too many participants with too little
experience—but this was corrected in subsequent
consortia. Likewise the trade association was not in-
volved in earlier consortia—but its involvement has
been found to be so beneficial, in terms of expanding
the scope of the potential participation by firms and
in securing the legitimacy of the alliances, that its
involvement was seen as important in later alliances.
Thus, the alliances represent a form of advanced
“economic learning” in two senses: in the sense that
there is an underlying improvement from one gener-
ation of alliance to the next; and in the sense that the
knowledge generated is held by a number of firms
and agencies in the “space” that exists between firms
and agencies, i.e. in inter-organizational space. 34 It is
the capability to organize this space, through various
forms of consortia, alliances, trade associations and
keiretsu, that can be expected to have an increasingly
decisive bearing on international competitiveness.
33 ERSO proposed a major Liquid Crystal Display (LCD) project
in the early 1990s, which it was anticipated would result in the
spin-off of a new world-class LCD producer to match Japanese
and Korean capabilities. The proposal was snuffed out due to
the objections of industry incumbents which at that time did not
have LCD businesses of their own, but entertained plans to enter the
industry. (A scaled-down LCD project was launched subsequently
in the mid 1990s.) See Linden et al. (1997) for a discussion of
this incident.
34 On the concept of “economic learning” as a process of
inter-organizational learning within an institutional framework, see
Mathews (1996).
650 J.A. Mathews / Research Policy 31 (2002) 633–651
6. Concluding remarks
This article is to be interpreted as an appreciative
study (in the sense of Nelson and Winter, 1982) of
the Taiwan R&D consortia, bringing them to the at-
tention of the scholarly community as an interest-
ing institutional innovation in their own right. The
Taiwan R&D consortia both take over some of the
most effective features of the consortia found else-
where and add some distinctive ones of their own.
Thus, it may be reasonably concluded that the con-
sortia have been a net benefit in Taiwan’s industry
development and upgrading. Furthermore, they pro-
vide a model for other newly industrializing countries
(NIC) still in the process of seeking to catch-up with
advanced technologies—provided that countries can
develop the institutional capacity needed to form con-
sortia and manage the diffusion of technology within
such an innovative institutional framework. Further
analysis of the consortia would depend on the collec-
tion of more extensive data, from the companies in-
volved, as well as from those which became players
in the targeted industries but elected to stay outside of
the consortia. The article will have served its purpose
if it helps to spark such further scholarly investigation
of these institutional innovations, in Taiwan and else-
where.
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