Among the newly industrializing economies Taiwan has made considerable progress in building up its steel industry which presents a
successful example of government policies in concert with active investment behavior of firms. This study aims to examine the productive
efficiency of Taiwan’s steel industry based on a panel data during 1970~1996. Using the Data Envelopment Analysis (DEA), the study not
only examines the industry-level technical efficiency across the same period, but also includes the two contextual variables, namely, business
cycle and technological progress, into the DEA model to manifest the catching-up effects of the Taiwanese steel industry. The empirical
results show that technical efficiency along industrial evolution is generally influenced by policy measures engaging in market liberalization
and steel firms’ adaptation and mastery of advanced technology, and provides some policy implications for other countries facing
the dilemma of industry targeting.
Keywords: Business cycle; Industrial performance; Technical efficiency; Technological progress; Total factor productivity