The dynamics of development are specific, they flow and connect with one another and they all must be present in some form to ascertain even and desired forms of development. Places are transformed by ‘flows of capital, labour, knowledge, power’ (Henderson et. al., 2002: 438). Place can be specified as in the form of an ‘institution and or social fabric’ (ibid: 438) that actually transform the flows according to where they locate (ibid). The idea of economic development is a somewhat complex process, not only does it involve economic factors but it also takes into account ‘institutional, social, and political changes’ (Ho, 1987: 226), thus showing the importance of the ‘interrelationships between economic and the non economic’ (ibid: 226). Innovation within local economies can be seen in the development of the Hsinchu industrial cluster within the Northern region of Taiwan. The cluster is one of the first areas where collaborating high tech firms developed. (Hsu et al, 2003). When assessing Hsinchu’s economic development path, one notices that technological aspects, human resource, infrastructural, governmental and financial rents are created. These enhancements that are captured by firms allow the firm to specialise in particular forms of inter/extra-firm network relations (Coe, 2009).
The Northern region of Taiwan has seen exponential economic growth and development over the past thirty years. There has been a number of factors that have accelerated this development process. To start, the city-region of Hsinchu experienced government initiated developments such as the Industrial Technology Research Institute (ITRI) and the Taiwan Electrical and Electronic Manufacturers Association (TEEMA), both aimed towards accelerating technological advancements, upgrading and intensive R&D (Mathews, 1997). The aim of ITRI is to monitor global technological developments and tailor relevant interests towards Taiwan’s industrial cluster situated in the Hsinchu city-region (ibid). Under licensing or through joint developments, ITRI absorbs and adapts new technology before involving privatised small and medium domestic firms (SMEs) located nearby and in the HSIP (ibid). With a focus on high technology and engaged in industry formations of R&D collaborations, ITRI also facilitates the creation of new industries (fine chemicals, pharmaceuticals, optoelectronics, aerospace) and upgrades existing industries. ITRI conducts this by transferring the institution’s technological know-how across products, equipment, and educating domestic firms who take over further commercial development and thus, in that sense, ITRI’s business is not research so much as a ‘technology transfer’ (ibid: 31). ITRI’s funding came from both governmental and private sector investment (ibid). TEEMA plays just as similar a role as ITRI, providing domestic alliances to accelerate technology take-up and competence acquisition. TEEMA provides institutional support for many SMEs by promoting industry diversification, establishing strategic alliances and creating a successful model of Taiwanese industrial ecology (Porter, 1998).
The roles of both ITRI and to a lesser extent TEEMA were important factors that contributed towards the interconnected framework of the Hsinchu region. ITRI acts as a ‘bridging’ institution and promotes personnel, technological and information interactions between the SMEs located in HSIP (Hung et al. 2003). By initiating this network structure and involving firms that have relocated to HSIP, ITRI has managed to encourage higher levels of inter and extra firm dependencies within the cluster. This is aided by the diffusion of ITRI personnel into domestic firms. Highly skilled workers maintain their levels of communication and cooperation with past ITRI colleagues, thus aiding the