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Manufacturing and Innovation - Review of Making in America

Posted by: Christopher Laubenthal on December 05, 2013 Source: Policy Dialogue on Entrepreneurship

American firms and entrepreneurs innovate here, but what these same firms do not do is produce here. In Making in America: From Innovation to Market, Suzanne Berger with the Production in Innovation Economy (PIE) research group at the Massachusetts Institute of Technology uses declining manufacturing and increasing trade deficits as a starting point for an in-depth discussion on production and innovation in America.

Much of Berger’s discussion centers on the concept of a fully developed, industrial ecosystem and how it can interlink production and innovation. Berger describes an industrial ecosystem as a localized system of capabilities accessible to firms including skills, funding, precompetitive R&D, suppliers, facilities, and industry knowledge. Many firms could draw on these capabilities and combine them with their own internal resources to innovate. The thesis is that with these production capabilities in place, closely linked to firms, there is a potential to accelerate the rate of innovation and increase jobs.

Berger argues that in the U.S., the industrial ecosystem has thinned out. Firms now have less access to the capabilities outlined above. In spite of this, American firms are still innovating, but doing so in an unsustainable manner. Berger’s fear is that current levels of innovation are “taken for granted as if it were a natural endowment of the territory,” instead of addressing the gaps in our present-day industrial ecosystem.

The proposed solution is to redevelop our industrial ecosystem, and use the newly redeveloped industrial ecosystem to provide sustainable and transformative innovation. In outlining how to do this, Berger provides a few principals that can be applied to meet the regions specific ecosystem gaps:

  • Develop advanced manufacturing technologies and a decentralized production system.
  • Promote the bundling of services and hardware
  • Develop regional roadmaps that identify the industrial ecosystem’s strengths and weaknesses.
  • Create non-federal groups who are not-for-profit or public institutions. These groups have a goal to convene the areas firms, coordinate the current ecosystem capabilities, pool risk and use the pooled risk to redevelop missing ecosystem capabilities.
  • Build trust with member firms or groups by including them in the development process and being transparent.
  • Work with members to articulate rules for membership into these groups, including who gains the commercial value of newly developed capabilities.
  • Incentivize contributions from members.
  • Secure equal parts funding from public and private institutions for these groups, in such quantity that parties feel each stakeholder is committed and that the group could withstand the loss of a member.

Berger’s solution, and the examples provided, is one that can instill hope, because these principals represent an improvement from the last time the industrial ecosystem that was fully developed: post-World War II. The book provides a detailed history of both the more recent thinning out of the ecosystem, as well as the historical post-World War II system. Such a discussion is beyond the scope of this review, but, broadly, one of the hallmarks of the post-World War II industrial ecosystem was vertical integration. For industry giants, like DuPont, everything was located under one roof.

Berger suggests communities mimic the vertical integration of old by aggregating components of production under a local authority that oversees the usage of shared resources and knowledge. By using a local, non-profit third party, like a Commerce Council, if a company leaves or fails, the work does not go with them. In this way the new industrial ecosystem is more resilient and more tied to the community than a vertically integrated firm might be. Administration and execution of this solution is clearly an issue. A third party overseer requires funding and buy-in from local companies. It will be hard to get industry competitors to trust each other and equally hard to secure public funding in our current political environment. Further, interested actors for the role of third party convener might be inconsistent across regions, resulting in varied implementation of the concept.

Making in America is a helpful read for those who believe America’s long-term economic success is tied to its manufacturing sector. If you reject that core assumption, I do not believe Berger and the PIE research group will fully sway your opinion. Regardless of belief, this book does an excellent job identifying our current production environment and the environments of other countries. Further, it should be noted, that unlike other books that diagnose shortcomings in our Country, this read attempts an answer that is thematically developed.

Category:  Growthology 

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