Taiwan's Venture Capital: Policies and Impacts
Taiwan's Venture Capital: Policies and Impacts
Lee-Rong Wang
Introduction
Since the mid-1970s, Taiwan's labor-intensive industries have been losing their comparative advantage due to the domestic shortage of labor, environmental pollution problems, etc. The need to shift from traditional manufacturing industries to high technology (hi-tech) industries has therefore emerged. Among the various projects and policies designed to promote the development of hi-tech or strategic industries, Taiwan's government in 1980 established a Science-Based Industrial Park (SBIP) in Hsinchu in northwestern Taiwan to attract hi-tech enterprises to set up bases in Taiwan. However, the creation of such enterprises usually involves high risk which makes it difficult for these enterprises, despite their high potential for growth, to acquire financial support from traditional lending institutions. Venture or risk capital thus arose in Taiwan as a new source of industrial financing for hi-tech enterprises.
A venture capital enterprise (VCE) often invests money solely on the basis of an entrepreneur's promising idea, a form of collateral that conventional bankers consider worthless. Typically, venture capital (VC) is aimed at new technologies or innovative products in microelectronics, computers and biotechnology. The roots of VC industries are embedded in the United States, where the techniques