Agency problem, institutions, and technology policy: Explaining Taiwan's semiconductor industry development

Taiwan has made significant progress in the semiconductor industry with government agencies and bureaucrats as the driving forces over the past 30 years. Taiwan's impressive achievement in the semiconductor industry clearly indicates that the government failures and agency problem usually associated with deep government involvement did not occur in Taiwan. Why is that the case? This paper proposes a principal-agent framework for technology policy and applies the framework to discuss the institutional arrangements through which bureaucrats were controlled effectively in executing the semiconductor industry policies in Taiwan. By analyzing the institutional and organizational arrangements Taiwanese leaders made to mitigate the agency problem, this paper brings bureaucrats into the popular developmental state theory and emphasizes that the success of state intervention should not be taken for granted, and it also brings politics into technology policy analysis and stresses the importance and complexity of agency problem in technology policy. (c) 2006 Elsevier B.V. All rights reserved.