87 MARTINDALE CENTER FOR THE STUDY OF PRIVATE ENTERPRISE post-pandemic annual growth stagnated at 0.1% (2021–2024) (IMF, 2024d), reflecting volatility in semiconductor markets (Iyengar, 2024). In contrast, Singapore actively attracted multinational companies, resulting in 6.9% growth, while Hong Kong’s role as Asia’s financial gateway fueled growth at 2.2% during that same period (IMF, 2024a; Tan & Chia, 2016). Although South Korea performed worse, at –1.3% (IMF, 2024b), it launched the Advanced Venture Investment Market Leap Plan to boost VC via tax incentives, financial resources, and regulatory support (Min-hee, 2024). However, direct comparisons with Taiwan’s fellow Asian Tigers miss the island’s unique constraint: geopolitical ostracism limiting it to export-oriented trade (Tan & Chia, 2016). Compounding this limitation, personal computer components (including integrated circuits) and mobile device manufacturing have shifted across the strait to mainland China (Feigenbaum, 2020). The very hardware industry that Taiwan has prioritized—at the expense of innovation—now faces outsourcing to its primary geopolitical adversary, creating an existential threat. In short, Taiwan has forced itself into a corner through overreliance on China for semiconductor exports and suffered international ostracization from China’s reunification agenda (Embassy of the People’s Republic of China…, 2022). Whereas other southeast Asian nations invested in innovative start-up ecosystems by building relationships with global partners, Taiwan grew complacent with its market-leading position in semiconductors and its relationship with China. Consequently, this lack of prioritization has deterred entrepreneurs and investors, both domestic and foreign, from engaging with Taiwan’s economy. Taiwan’s current start-up ecosystem In December 2016, former President Tsai Ing-Wen announced Asia Silicon Valley to boost higher education, strengthen US ties, and transition away from traditional manufacturing (Iok-Sin, 2015). While Asia Silicon Valley aimed to replicate the US Silicon Valley’s ecosystem, it overlooked a significant weakness, Taiwan’s risk-averse investor mindset (Kao, 2017). This risk aversion stems, in part, from Taiwan’s small domestic market and export dependence, which expose it to global supply chain disruptions (Vest et al., 2022). However, there are deep cultural roots as well. Even the terminology VC had to be altered when it arrived in the 1980s; the term translated to “risky investor.” To decrease the perceived risk of the asset class, officials instead promoted “start-up investor,” adjusting to Taiwan’s deeply conservative business culture (Klingler-Vidra, 2018). Lauren Kao (2017) of the Global Taiwan Institute argues the Silicon Valley approach of “fail fast, fail often” should be a source of inspiration but not the sole model for domestic venture funding. Taiwan must embrace risk and failure in pursuit of innovation. While Taiwan’s start-up ecosystem survives thanks to its strong semiconductor industry, the US– Taiwan Business Council anticipates President Lai Ching-te will maintain former President Tsai’s proVC policies. Yet Taiwan’s risk aversion must change to give Taiwan’s entrepreneurs a chance for success (Vidal & Sabater, 2024). Inconsistent government initiatives and policies President Lai unveiled Asia Silicon Valley Development (ASVDP) 3.0 in 2024, focused on two pillars: “Promoting the innovative research and development for the Internet of Things” and “building a comprehensive ecosystem for innovative startups” (National Development Council [NDC], 2025). This policy is interesting because the government aims to double start-up investments by mobilizing finance and insurance firms, VCs, large firms, and other private sources. The primary goals are increasing Taiwan’s Internet of Things global market share to 5.2% by 2028, promoting 300 AI of Things smart solutions, establishing three overseas bases in key markets for a “rainforest ecosystem,” increasing start-up investments to US$5B, and supporting 100 successful start-up exits. However, the vision ignores significant pitfalls that Taiwan faces during this transition period, notably, a fragmented bureaucracy that creates inefficiencies. TVCA chair Andy T.C. Chiu noted that nine government departments manage various aspects of the start-up process, limiting policy effectiveness and cohesiveness (Wu, 2024b). Table 1 lists the responsibilities of the four main agencies, suggesting how complicated it can be for a potential start-up to navigate the myriad regulations and potential sources of support. For example, a biotech start-up must navigate approvals from the Ministry of Economic Affairs and the National Science and Technology Council, funding from the Small and Medium Enterprise and Startup Administration and the National Development Fund (NDF), and product testing and clinical trials with the Taiwan Food and Drug Administration. In addition, five ministries are involved—the Ministries of Labor, Finance, Education, Transportation and Communications, and Health and Welfare—further fragmenting oversight.
RkJQdWJsaXNoZXIy MTA0OTQ5OA==