How to explain the rise and fall of the Taiwan independence policy? As the Taiwan Strait is still the only conceivable scenario where a major power war can break out and Taiwan's words and deeds can significantly affect the prospect of a cross-strait military conflict, to answer this question is not just a scholarly inquiry. I define the Taiwan independence policy as internal political moves by the Taiwanese government to establish Taiwan as a separate and sovereign political entity on the world stage. Although two existing prevailing explanations--electoral politics and shifting identity--have some merits, they are inadequate to explain policy change over the past twenty years. Instead, I argue that there is strategic rationale for Taiwan to assert a separate sovereignty. Sovereignty assertions are attempts to substitute normative power--the international consensus on the sanctity of sovereignty--for a shortfall in military-economic-diplomatic assets. So when Taiwan's security environment becomes more perilous as a result of adverse power shift and domestic constraints hinder internal balancing efforts, Taiwan is more likely to resort to sovereignty assertions, while favorable power shift and enhanced domestic mobilizational capacity reduce the incentive to assert sovereignty. Using congruence procedure and process tracing and drawing a large amount of historical and qualitative data, I test my argument in five periods: the early Lee Teng-hui years (1988-1994), the late Lee Teng-hui years (1995-1999), Chen Shui-bian's early moderation (2000-2001), the Chen Shui-bian era (2002-2007), and the Ma Ying-jeou era (2008-2010). I find that my theory focusing on external and internal constraints offer a better explanation of the Taiwan independence policy. My findings suggest that balancing, as a survival and security strategy, can take a political face under certain circumstances, and international norms do matter in political leaders' strategic calculations. An important policy implication is that in contrast to the conventional understanding that Taiwan independence grows out of the Taiwanese soil, it actually has an overlooked external origin.