US Manufacturing decreases and possible Innovation Impact

A New York Times article (February 12, 2011) describes the drop in employment in US manufacturing – from 11.6 million in 1979 to 8.1 million in 2010, and worries about the consequent impact on innovation. Some experts suggest that manufacturing spurs innovation – and that the increased in the imported fraction of components in US manufactured products from 17 % in 1997 to 25 % in 2010 will diminish product designs developed by US Engineers. Susan Houseman from the W.E.Upjohn Insitute is quoted as saying “The big debate today is whether we can continue to be competitive in R&D when we are not making the stuff we innovate”. Is the decline in US manufacturing a cause for concern for US product innovation ? Can the information regarding products and their performance enable innovation without the experience of manufacturing ? If US companies own plants abroad as part of a global supply chain, would US innovation still be impacted ?

1 Response to US Manufacturing decreases and possible Innovation Impact

Jan Fransoo says:

February 15, 2011 at 2:58 am

In the studies that I have conducted with high-end equipment manufacturers, it is pretty clear that innovation and manufacturing operations need to be co-located. Only a very small number of companies succeed in keeping up the speed of transferring new innovations to manufacturing once manufacturing has been offshored. Once they face these difficulties, most companies then choose to also offshore their innovation departments (product R&D, production technology, etc). I would agree with Houseman that continually offshoring manufacturing will lead to offshoring of innovation, or losing the speed of innovation. However, this may be very different for relatively “simple to assemble” consumer products such as cell phones or computer game consoles. Manufacturing of these devices has bene very much commoditized and offshoring may be less harmful to keeping innovation on-shore.