Abstract: Institutional Changes, Social Networks, and the Development of Taiwan's Small and Medium-Sized Manufacturing Enterprises in the Postwar Period and from the 1950s to the 1990s
Chinese social networks have always played a significant role in Chinese business societies. The story of Taiwanese small and medium-sized manufacturing enterprises (SMEs) is usually taken as a successful example of network-based business operation in our own day. Much has been written on the use made of social networks by these SMEs to facilitate their business operations, but some questions still remain. Why were the social networks not managed by the SMEs effectively before 1970? Why did the SMEs rely on the social networks for business after 1970? How much did the SMEs rely on the social networks for their business operations? The paper finds that the rise of the SMEs and the successful use of the social networks are related to an open market. Furthermore, the evidence explains and quantifies the SMEs' heavy reliance on the social networks by demonstrating the financial sources of the SMEs for business operations from 1970 to the late 1990s. The findings of this paper demonstrate that, as long as they had an open market, the SMEs, with the financial support of the social networks, were able to operate business notwithstanding institutional changes.