Innovation and manufacturing should go hand in hand

The once dominant manufacturing sector is what powered the US economy towards economic domination, but in light of increased competition from emerging markets, industrial jobs have taken a severe dip over the last two decades. According to some figures, the country has lost as many as six million jobs over the last decade alone to other countries.

Reviving them is promoted by many as the best way of getting the US economy back on track, as well as providing jobs for the growing number of unemployed, but undoubtedly the industry needs to modernise if it’s to return to its glorious past.

How to do that is disputed. On the one hand, some believe that a standard investment in factories and infrastructure, creating those much-needed jobs, is obviously a place to start.

But many economists believe that boosting investment in R&D, and keeping the brightest brains close to the manufacturing sector, is the best way of fueling innovation and long-term economic growth.

At a recent Brookings Institution conference, panellists discussed how the US manufacturing sector could get back on track, and why it had faltered in recent years. Bruce Katz, the Brookings Institution’s vice president, said: “We still think about manufacturing in the US as yesterday’s economy as opposed to the vanguard of innovation in our economy.”

He added that the country had lost jobs, while still investing in innovation, something which needed to change. Manufacturing accounted for “nine percent of jobs, eleven percent of GDP, 35 percent of engineers, 68 percent of private R&D, and 90 percent of our patents,” adding that the US “may be the only economy to decouple production and innovation.”

There are signs that this may be changing, however. A recent piece in the New York Times highlighted a General Electric battery plant in New York, close to GE’s research facility, allows for a more efficient development of products. GE’s Michael Idelchik told the paper: “We believe that rather than a sequential process, where you look at product design and then how to manufacture it, there is a simultaneous process.”

Other countries have been eager to create whole innovation hubs close to their manufacturing sectors. In the forthcoming issue of The New Economy, I spoke to Frans Schmetz, managing director of the Netherland’s High Tech Campus in Eindhoven, who told me that the collaborative nature of having so many companies conducting research – they have 115 – allows for greater innovation, which can then be easily used by the manufacturing sectors throughout Holland, as well as neighbouring Germany.

Similar research hubs have sprouted up elsewhere, with Cambridge providing considerable innovation to industries just to the south in London, and the Kista region of Stockholm providing the latest research for Sweden’s industrial output. China and Taiwan have also poured money into their own research centres.

Evidently the US needs to play catch-up with these other regions, in order to improve manufacturing. Stephen Hoover, CEO of PARC, a research subsidiary of Xerox, thinks it is already underway, telling the New York Times: “The manufacturing process itself is going through an innovation revolution.” If he’s right, then it can only be good news for the country’s once great economic engine.