The competitive industrial policies adopted in Taiwan have been an important factor in its economic development. Not only have they created a protected industrial structure that has secured the rapid maturation of targeted industries, but the government has also encouraged private participation and competition. To understand the determining factors behind Taiwan’s successful economic development, this study examines the relative importance of the industry-level effect and the firm-level effect on the performance of firms in Taiwan. Firms in the textile industry, an early-targeted industry, and the IT industry have been selected to provide a comparison of the effects of the policies adopted. This study also uses new performance measures that are computed from Taiwan’s financial database. The findings show that firm effects dominate the explanation of the variation in performance. The industry and year effects are either negligible or else have no impact on the variation in performance. The results also suggest that the value-based measures of performance explain more of the variation in performance than the accounting measures.
Keywords: industry policy, textile industry, IT industry, performance