It’s an interesting question, given that Taiwan used to compare itself favourably to Korea until relatively recently.
Regarding working hours, I doubt there is much difference between Taiwan and Korea, people working in the tech industry almost all work long hours.
I don’t think that the Koreans have a better e-commerce or software setup than Taiwan, they may have faster broadband but not really more technoliterate or innovative in that regard. Taiwan’s government has extremely efficient online service operations and online banking and internet services are huge here, I just see any real difference. Besides Koreans have not had any Facebooks or Googles launched, it’s all been hardware and product based until now.
I think MM has it mostly right, the migration of industry to China and SE Asia meant they didn’t have to actively upgrade their business model, this in turn resulted in a hollowing out of the local economy. Lack of unions in Taiwan and lack of real affinity to the local society along with the ease of language and cultural links to move to China may also have played a part. Having a smaller land mass and population also means the local economy is not as big. Political and economic isolation has been a major factor, trade agreements have helped Korea forge ahead worldwide with major FTAs while Taiwan has concentrated a lot of it’s business on China over the last decade, that’s fine except that China is still only a minor part of the world’s economy as a whole.
Taiwanese companies have invested big into some industries such as DRAM and LED, but they seem to have then concentrated on cost-down manufacturing process rather than moving to the next technological step, such as the Koreans have done with AMOLED and SSD memory.
There has been a lack of vision and perhaps risk taking among some of the biggest companies , some have run out of steam like Da Tong. On the other hand in Korea the chaebol family run companies seem to have restructured successfully since 1997 and gone from strength to strength , Samsung, LG, Hyundai etc.
The Koreans have integrated foreign operations earlier into their business, companies such as Hyundai have significant manufacturing operations overseas. This has allowed them to become more international facing. Not all Korean companies have succeeded in the automobile space, perhaps they had simply more companies and bigger resources so the strongest fish in the sea was able to survive and eventually prosper.
They also have a broader manufacturing base, Taiwan is lacking in that regard with too many eggs in the electronics sector.
I would say the main problem is lack of investment in customer branding , inability to keep with the truly massive investments in technology and sticking to the OEM/ODM model for far too long. This resulted in their margins getting tighter and tighter , they could still invest in industrial expansion with cheap government backed loans but the ability to pay back these loans is now in question.
On the smaller scale Taiwan’s SMEs compete quite well, I think it’s the large scale operations that have been very slow to change their ways. Too much focus on moving operations to China. We can see some like HTC do have the vision but perhaps are still too small to compete toe to toe with true giants like Samsung and Apple which have already grown so big. Taiwan keeps flogging a dead horse and needs to significantly rethink the way it does things (not simply jiggling around a few pieces) before it can really move ahead economically.