Assembling Innovation

The “evisceration of the manufacturing work force” may have dimmed America’s “capacity to innovate,” reports Annie Lowrey in The New York Times (12/14/12). “In sector after sector, we’ve lost our innovation edge because we don’t produce goods here anymore,” says Mitzi Montoya of Arizona State University. This is particularly true in high-tech sectors, in which some experts contend “companies that keep their research and manufacturing employees close together might be more innovative than businesses that develop a schematic and send it overseas for low-wage workers to make.”

General Electric, for example, maintains a battery-manufacturing plant near its research campus in upstate New York, so that its scientists can “work out kinks on the assembly line, and test prototypes of and uses for the battery … The idea is to knit together manufacturing, design, prototyping and production.” As GE’s Michael Idelchik explains: “We believe rather than a sequential process where you look at a product design and then how to manufacture it, there is a simultaneous process … We think it is key for sustaining our long-term competitive advantage.”

Economists have long noted a similar “spillover” effect when manufacturing companies locate near each other: “Workers exchange ideas over drinks and at baseball games. They switch jobs, taking their knowledge with them. They draw other companies … It all adds up to a more productive, innovative economy.” Noting the link between manufacturing and innovation, the White House “has pushed for … an array of policies to bring back manufacturing and keep it in the United States.” McKinsey’s James Manyika notes the US has lagged in this regard, while other countries “are competing intensely to create an attractive business and regulatory environment for manufacturing firms.”