The economy of Taiwan relies heavily upon the electronic manufacturing industry; hence choosing appropriate generic business strategies which are consistent with the environment based on suitable resources can allow small and medium size firms to sustain their competitive advantages and earn a higher return for the electronic manufacturing industry in Taiwan. This study intensities the effect of the precedent factors and generic business strategies chosen on the performance of small and medium size firms in the Taiwanese electronic manufacturing industry. It explores simultaneously the impact of the resources and the environment on business strategy which affects a firm's performance will provide valuable insight into the formulation of competitive strategies by structural equation modeling (SEM) technique. Finally, the use of SAS 9.0 with Amos 5.0 perform first order confirmatory factor analysis for the reliability of questionnaire and explores the relationship among variables in the proposed model based upon path analysis and multiple regression statistical methods and to recommends a new model depending on survey data gathered from firms in Taiwanese electronic manufacturing industry.