Taiwan is a small island economy. For past few decades, two-thirds of agricultural growth was attributed to technological progress. Induced innovation was the mainstream of technological progress, which overcame the constraint of scale diseconomies and shortens product life cycles in Taiwan. However, traditional land and labor-intensive oriented agriculture has lost its competitiveness drastically in the course of globalization and trade liberalization. Facing the keen global competition and the era of knowledge economy, the government has implemented a series of measurements to encourage research institutes, universities, and private R&D institutes to devote to innovative activities to enhance agricultural competitiveness. In the long run, the government budget for agricultural research has shown a rising trend. However, the technological transfer ability and mechanism between private corporations and research institutes in Taiwan still need to be strengthened. Based on this study, the relation between S&T factors and enhancing agricultural competitiveness during the past two decades has not been proven yet. Therefore, institutional innovations for the agricultural sector, such as land enlargement programs, are needed, and the directions and topics of the R&D institute should be more market-oriented to meet the demands of farmers and corporations.