search for new competitive advantages many companies from Taiwan relocated
their operations to low-wage countries, especially in mainland China and
South-East Asia (Zhu and Warner, 2001).
SMEs and state-owned LEs
Different enterprises had different approaches to the changes in the labour
market and the challenges of global economic competition. Two major vari-
ables are family-based small- and medium-sized enterprises (SMEs) and state-
owned large-sized enterprises (LEs). SMEs have been seen as the most dynamic
and flexible sector determining Taiwanese economic growth (see Hamilton,
1997). However, since the mid-1980s, more SMEs have felt the environment
becoming less favourable for their business in Taiwan: higher business costs
and more regulations control their business operations. In addition, inter-
national competition is forcing them to reorganise their businesses in order to
survive. The major changes include internationalisation of business operations,
professional management and more flexible HRM and marketing strategies.
The SMEs still have a centralised decision-making process. However, there
is a tendency now for owners gradually to withdraw from routine management
activities. Some high-ranking managers are trained and promoted within the
companies and are not necessarily family members. Management professional-
ism is becoming more important and it is a kind of response to the criticism of
managerial nepotism. During the recent financial crisis, more companies
realised that more effective management and relevant skills were crucial to
business survival. Therefore, middle-level managers and skilled employees
may be recruited externally from formal employment agencies. Most SMEs
now pay attention to both pre- and ongoing types of training in order to cope
with market changes and link the skills of employees with the needs of produc-
tion. The compensation package has not been changed and the philosophy of
‘harmony’ still plays an important role in wage determination. Therefore, the
wage-gap between top managers and bottom employees is about five times,
which is much lower than that in foreign owned enterprises (FOEs), where
sometimes it is over 20 times (e.g. in the US firms) (Zhu and Warner, 2001).
Trade unions have always been weak in SMEs. Although the Trade Union
Law (1975) required unions to be established in workplaces in most sectors
with more than 30 employees (Lee, 1988: 188–191; cf. Warner, 1995), the real-
ity is that even now a large number of SMEs are without union organisation.
In addition, the major tasks of unions in these firms are rather narrowly
defined, such as communicating with and assisting management, organising
annual union meetings and collective agreements with management once
every three years. There is a general sense that the managers in SMEs do not
want union involvement in decision-making (Zhu and Warner, 2001).
On the other hand, the state-owned LEs in Taiwan for years enjoyed mono-
poly status in key sectors. This was in the strategic industrial areas with strong sup-
port provided by the government. However, in recent years, privatisation and
206 International Human Resource Management