F or over 30 years, U.S. manufacturing has been in relative decline in the face of relentless competitive pressure. Rebuilding our relative competitive position in manufacturing will not come easily. Years of manufacturing decline have eroded the “industrial commons” on which globally competitive manufacturing depends.
The networks within the industrial commons resemble an “ecosystem” that speeds innovation. These connections help companies absorb or develop new technologies faster, spot market opportunities faster, assemble human and financial resources faster, and move faster. When these relationships break down, companies – especially small and medium-sized enterprises (SMEs or “Main Street manufacturers”) — become less able to innovate. (MIT’s Production in the Innovation Economy project is exploring this breakdown.)
As our industrial commons has eroded, supply chain relationships among Main Street manufacturers and larger companies have also broken down. Understanding and rebuilding these value chain relationships has become critical to driving growth and prosperity for both companies and countries.
Rebuilding the U.S. industrial commons will take place within our regional economies and focus on small, innovative manufacturing companies. Innovative SMEs rely heavily in the industrial commons within a single region, because they are not sufficiently large to operate in multiple regions. In disadvantaged or “ordinary” regions, the challenge of innovation becomes even more difficult. These regions tend to hinder the networking, co-operation and interaction essential to innovation.
Momentum is growing within the U.S. to support the vital role of Main Street manufacturers. Yet, the U.S. is relatively late to the game. Germany represents the global leader in accelerating innovation and high value exports among smaller manufacturers. The second largest manufacturing exporter after China, Germany has a larger share of the world’s merchandise exports than the United States, an economy four times its size.
Despite the renewed interest in high value manufacturing, the U.S. does not have a replicable, scalable and sustainable model of how to rebuild the industrial commons to support innovative SMEs.
That’s what we’re working on now at Purdue.