The Leader Firms and the Evolution of an Industrial District: A Case Study of Hosiery District in Taiwan

Abstract

The transformation of industrial districts has become a hot debate since the increasing globalization of national and regional economies occurred in the 1980s. This paper empirically examines the changing social networks, technological learning and industrial organization in the regional transformation of the hosiery district in Shetou, Taiwan. It shows that primordial social ties render the production networks costless and the networks of learning efficient for price competition in the early stage. However, as new challenges linked to the globalization process approach, the leader small and medium sized enterprises in Taiwanese industrial districts are not necessarily compelled to shift production jobs abroad, but they reposition themselves in local production chains with incurring extra-local resources to cope with the threats from new competitors. On the one hand, these leader firms take strategies of local reaction to rely overwhelmingly on local supply chains to meet the challenge. On the other hand, those owners of workshops which sit in the bottom of the local supply chains can do nothing but to live self-exploitative lives and face the perils of extinction.

Acknowledgements

We sincerely appreciate the anonymous reviewers for constructive comments on the earlier version. We would also like to thank the following funding agencies for supporting the research on which this paper is based: the National Science Council (grant #: 96-2415-H-002-021-MY3) and the Program for Globalization Studies (grant #: 97R0064-15) of the Institute for Advanced Studies in Humanities and Social Sciences at NTU. We are responsible for all errors and/or mistakes

Notes

The number was an informal estimate by the local hosiery association.

Interview with interviewee A-01, 9 January 2006.

Interviewed with interviewee A-01, 9 January 2006.

But, under certain circumstances, the subcontractors could unite to fight for unfair wage cut. For example, a dispute was raised by the abrupt half cut of subcontracting fee in 1995. According to the report in China Times (6 May 1995), it was due to the shortage of order which was allocated mostly to labour cheaper location such as the Southeast Asia and Mainland China. Also the appreciation of Taiwanese dollar concurrently devastated the profit-making of the hosiery orders in 1995. As a result, the profit loss was transferred to the subcontractors. After the collective strike and fight by the subcontracting homeworkers, an agreement was reached and the contractors and the subcontractors burdened the loss equally.

Interview with interviewee B-02, 15 February 2006

Interviewed with interviewee A-08, 7 September 2006.

Interview with interviewee A-05, 17 February 2006.

Interview with interviewee A-I04, 12 February 2006.

Interview with HSAIOTEX, 20 March 2006.

In particular, the restructuring process usually entailed the subcontractors to change their methods of doing things and even machinery which might be costly and risky without order guarantee. As a result, the subcontractors usually hesitated to invest and brought forth conflicts with the subcontracting firms who encouraged the subcontractors to match the demands on new investments.