Taiwanese Firms Gain And Prolong Competitive Advantages

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Executive Summary
Taiwanese firms gain and prolong competitive advantages, by acquiring and broadening their underlying resource base through linkage, leverage and learning processes, and through institutional supports, rather than seeking an understanding of how they create advantages in the first place. They pose linkage as the initial step that generates opportunities for the LCFs, resource leverage through contract manufacturing, brain drain and corporate Apprenticeship as the means through which the LCF is able to exploit the linkages established, and learning as the outcome of repeated applications of linkage and leverage by the LCF, resulting in the acquisition of dynamic technological capabilities. (Matthews, 2002a)
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In the 1980s, a new variant of OEM called own design manufacture (ODM) evolved. Under ODM, the developing country firm carries out most of the detailed product design, having received an overall design layout from the TNC customer. The TNC continues to carry out the marketing and distribution functions under its own brand name. However, the latecomer firm is expected to develop minor product improvement skills and to set up the necessary, often large-scale, manufacturing processes.
Then, in the 1990s, some of the leading firms in East Asia began own brand manufacture (OBM). Under OBM, the latecomer firm carries out all of the stages of production and innovation, including manufacturing, new product designs and R&D for materials, processes and products. (Hobday, Mike, 2003) TSMC set up own US manufacturing sites to strengthen the world largest wafer fabrication position and Inventec started its own contract manufacturing relationships.
-Leverage through contract manufacturing (OEM)
The OEM encourages much more technology transfer in global production network (GPN) compared to joint ventures, outsourcing, licensing and etc. Hobday and Mike described that OEM acted as a training school for latecomers, enabling them to overcome entry barriers and to assimilate manufacturing and design technology (Hobday, Mike, 1995). Furthermore, TNC depends
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