This paper looks at the history of Taiwan's bicycle and parts industries and examines the lessons that can be learned from it. It concludes that progress made under import-substitution contributed to the success of subsequent export-promotion. The initial impetus of the big change came in the form of an OEM order from the American Schwinn Company; thus it was the increasing internationalization of production, not internal market pressures, that gave Taiwan the opportunity to grow by exporting. Division of labor became finer as the market broadened and the type of market changed. The cost of using the market seems lower than that of using the internal organization in Taiwan, and hence the well-developed parts suppliers network, which is dominated by small firms. The recent upgrading of the industry, though successful, also resulted in a significant drop in the parts self-sufficiency rate, again reflecting increasing globalization. The future of the industry will also be influenced by a still-unfolding developemt, i.e.,firms moving production facilities to China.