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This paper compares the industrial transformation processes of the LCD (liquid-crystal display) and footwear industries in South Korea and Taiwan by situating the state, local capital and transnational capital on an equal footing and examining the relative strength of these actors across time. To understand the interplay of the three actors and their shifting balance of power, we follow the commodity chain perspective and define industrial transformation as a process of moving to a higher value-added chain in the global production network. The paper argues that statist arguments that privilege the role of the state vis-à-vis transnational and local capital in the process of industrial transformation need to be modified in order to incorporate a dynamic and changing power balance among the three actors, especially in the current context of globalization and liberalization in world economic activities. [ABSTRACT FROM AUTHOR]