iTaiwan’s automotive development strongly supports the proposition that capable institutions are crucial to helping firms in developing countries undertake industrial upgrading. Research institutes, testing and certification centers, training programs, industry associations, and government-supported corporate alliances have flourished for decades. Though modest in size and little known abroad, Taiwan’s leading auto companies export high-quality cars, design and engineer their own models, invest abroad, and export a wide variety of auto parts and car electronics. The success of Taiwanese firms is all the more striking in light of Taiwan’s small and stagnant domestic market. The government embarked on a course of gradual liberalization in the 1980s. Yet it never relinquished the goal of fostering domestically -owned companies capable of making their own vehicles, and simultaneously supported the activities of small and medium-sized firms that have achieved striking success in exporting automotive parts, especially bumpers, body panels, and other accessories for the after-sales market.