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This paper examines the transformation of the textile and garment industry in Taiwan from the period after 1945, when the industry was small and inconsequential, to the contemporary period, where the industry is a world leader at the frontier of fibre and new material development. The drivers of these developments include the role of industrial policy, initial assistance from the USA, generous export-orientated, investment-friendly incentives, and regulatory pressures imposed in global markets. Taiwan successfully restructured and reached the innovation-driven phase of the industry by the late 1980s, relocating labour-intensive activities to China and Southeast Asia, with Taiwan specialising in technology-intensive activities. Although the industry's employment and exports have fallen since the 1980s, the successful evolution of firms intohigh value-added and upstream activities continues to maintain the industry's dynamism in Taiwan. [ABSTRACT FROM AUTHOR]