FINANCING TAIWAN'S KNOWLEDGE-INTENSIVE FIRMS

The era of the knowledge economy has dawned and technological knowledge has already increased significantly over the last decade. At the start of the 21 century, the idea of the knowledge economy is widely adopted and it has become an important yardstick in the drive towards economic growth. The production inputs of labour, machinery, and land are no longer the sole motive power ensuring continuing economic development; now economic development must be founded on knowledge and information. In 1980 Taiwan embarked on a process of industrial upgrading, which brought extremely rapid growth in the island’s high-tech industry along with a steady increase in high-tech businesses' share of total production value. On 31 August 2000, the Administration Authority of the Executive Yuan approved the Knowledge Economy Development Project, which set out development strategies and measures for the drive towards the knowledge economy. Knowledge-intensive industries usually mean those industries that create value in products through innovation. They might be traditional or high-tech industries, although most knowledge-intensive industries are high-tech industries. The project of the Administration Authority demonstrates that continued promotion of the high-tech industry and technological upgrading would be vital aspects of future industrial development in Taiwan. A number of environmental factors are prerequisites for effective development of the knowledge economy. One of the most important of these is a sound financial environment. Advanced economies have highly developed financial systems and a wide range of financial institutions and financial instruments and offer high-tech firms a variety of financing sources. In