The uniqueness of Taiwanʼs industrialization is that small and medium-sized enterprises (SMEs) had been the major contributors to exports. What has been responsible for the success of the SMEs? How far and in what ways did the state contribute to their success: can it be attributed to the governmentʼs industrial policy? The statist account of Taiwanʼs development, a dominant approach to explain its economic growth, is weak in answering these questions. This article argues that the existence of a unique industrial structure was key in the explanation of Taiwanʼs SME-led exports. The industrial structure was basically a consequence of the stateʼs political strategies that determined its public policy towards the private sector. It argues that the market rather than industrial policy was the explanation of the industrial success of SMEs; the economic bureaucracy was a world of politics rather than a range of monolithic institutions; and strongman tactics rather than institutions were the source of state steering capacity and were responsible for the success of industrial policy. It concludes that Taiwanʼs development was a “politically inspired industrial success” rather than a state-led development.