What Taiwan can Teach India About Building World-Class Firms | Chang-Tai Hsieh | Ep 30 | Growth is Good

Why do some industrial policies produce companies like TSMC, while others end up wasting public money? And why do successful Indian firms often fail to grow as large as they should?<br><br>In this episode of Growth is Good, Rahul Ahluwalia speaks with Professor Chang-Tai Hsieh of the University of Chicago Booth School of Business about industrial policy, firm growth and some of the constraints holding back the Indian economy.<br><br>Drawing on his own experience working at Taiwan’s Industrial Technology Research Institute, Professor Hsieh explains how Taiwan went about building a semiconductor industry and eventually creating TSMC. For him, the important lesson is not simply that the government supported a strategic industry. It is that projects faced a clear test: could they become commercially viable businesses with customers willing to pay for what they produced?<br><br>They also discuss what happened after the 1991 reforms. As other constraints on Indian firms were removed, labour regulation became increasingly binding for larger firms. Contract labour eventually emerged as a way around this constraint, allowing firms to hire more workers but at an additional cost. Professor Hsieh describes this as a striking example of how businesses adapt to regulation even when the underlying friction remains.<br><br>Watch the full episode for a conversation on TSMC, industrial policy, labour regulation, firm growth, productivity and what India needs to do to become a much richer country.<br><br><h2>Chapters</h2>00:00 - Why industrial policy needs accountability<br>01:03 - Professor Hsieh’s personal connection to economic growth<br>05:35 - How Taiwan built its semiconductor industry and created TSMC<br>13:22 - The test every industrial policy should have: how do we know if it failed?<br>25:43 - Industrial policy cannot substitute for a well-functioning economy<br>27:45 - How economists diagnose what is going wrong in an economy<br>33:50 - Why labour and capital are misallocated across Indian firms<br>38:00 - How labour regulation became more binding after the 1991 reforms<br>43:03 - Contract labour as a costly workaround for regulation<br>44:30 - Why specific policies matter more than vague discussions about “institutions”<br>48:44 - What India should prioritise for the next 20–30 years<br><br><h2>About Professor Chang-Tai Hsieh</h2>Chang-Tai Hsieh is the Phyllis and Irwin Winkelried Distinguished Service Professor of Economics and PCL Faculty Scholar at the University of Chicago Booth School of Business. His research focuses on economic growth and development, including firm growth, productivity and the allocation of resources across firms.<br><br>Professor Hsieh’s profile:<br><a href="https://www.chicagobooth.edu/faculty/directory/h/chang-tai-hsieh">University of Chicago Booth profile</a><br><br>Selected research relevant to this episode:<br><br>• <a href="https://onlinelibrary.wiley.com/doi/full/10.3982/ECTA20046">Contract Labor and Establishment Growth in India</a><br><br>• <a href="https://www.nber.org/papers/w18133">The Life Cycle of Plants in India and Mexico</a><br><br>• <a href="https://www.nber.org/papers/w13290">Misallocation and Manufacturing TFP in China and India</a><br><br>Growth is Good is a podcast by the Foundation for Economic Development exploring the ideas, people and policies behind India’s growth story.<br><br>📌 Subscribe for more conversations with leading economic thinkers.<br>🔔 Turn on notifications so you never miss an episode.<br><br>#GrowthIsGood #ChangTaiHsieh #EconomicGrowth #IndustrialPolicy #TSMC #IndianEconomy #Productivity #EconomicReforms