The two have become mutually supportive and rewarded investors, especially those lacking patience, who appear to be in the majority, at least among those who still have something to invest or an inclination to do so.
But a funny thing happened on the way back from the financial crisis towards a stable and growing economy: manufacturers, those 'boring' asset sinks of yesteryear, enjoyed just enough demand to invest in innovations that made them more competitive and profitable. And it now turns out that those advances may play a more significant role in a broad set of industrial and commercial growth prospects than may have been previously understood.
The reason seems to be that applied research and development, focused on processes and the factors that improve them, are geared towards enhancing speed, efficiency, productivity and profitability. Those are drivers of value to entire swaths of the global economy, not just to the places in which they are invented, tested and installed. These sorts of innovations instruct and inspire development in other fields because the underlying application is fundamentally about producing items for sale. Which, many would argue, is the whole point of the capitalist system. JL
Annie Lowrey reports in the New York Times:
The Obama administration has long heralded the potential of American factories to offer good, stable middle-class jobs in an economy that desperately needs them. But experts say there might be another advantage to expanding manufacturing in the United States: a more innovative economy.
A growing chorus of economists, engineers and business leaders are warning that the evisceration of the manufacturing work force over the last 30 years might not have scarred just Detroit and the Rust Belt. It might have dimmed the country’s capacity to innovate and stunted the prospects for long-term growth.
“In sector after sector, we’ve lost our innovation edge because we don’t produce goods here anymore,” said Mitzi Montoya, dean of the college of technology and innovation at Arizona State University.
These experts say that in industries that produce complex, high-technology products — things like bioengineered tissues, not light bulbs — 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. Moreover, clusters of manufacturers, where workers and ideas can naturally flow between companies, might prove more productive and innovative than the same businesses if they were spread across the country.
A General Electric facility in upstate New York provides a test case. In a custom-built facility the size of four football fields, workers are casting into thin tubes a kind of ceramic that GE invented. Those tubes get filled with a secret chemical “brownie mix,” packaged into batteries and shipped across the world.
The plant sits just a few miles down the road from the research campus where GE scientists developed the technology. That allows them to work out kinks on the assembly line, and test prototypes of and uses for the battery, the company’s scientists said.
“We’re not thinking about just one generation,” said Glen Merfeld of GE’s chemical energy systems laboratory, showing off a test battery his employees had run into exhaustion. “We’re working on the second, the third, the fourth, the fifth.”
The idea is to knit together manufacturing, design, prototyping and production, said Michael Idelchik, vice president for advanced technologies, who holds a dozen patents himself. “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,” Idelchik said. “We think it is key for sustaining our long-term competitive advantage.”
Economists and policy experts are now researching whether such strategies offer the same benefits for other businesses — and examining how those benefits might show up in national data on innovation, productivity and growth.
At the Massachusetts Institute of Technology, Suzanne Berger has helped to start the Production in the Innovation Economy project to study the subject. “It is something that’s very difficult to establish systematically,” said Berger. “You really have to be willing to look at case-by-case evidence, qualitative evidence. That’s what we’re trying to do.”
Thus far, she said, the anecdotal evidence from about 200 companies has proved striking, with company after company detailing the advantages of keeping makers and thinkers together. That does not mean every business, she stressed. Companies with products early in their life cycle seemed to benefit more than ones with products on the market for years. So did companies making especially complicated or advanced goods, from new medicines to new machines.
“It’s the companies where the challenge of producing on a commercial scale requires levels of scientific activity that are just as complex as the original challenge of developing the technology,” Berger said.
Economists said that while the link between making and innovating within individual businesses was not yet well established, the link between making and innovating between different companies was.
It is what they call a “spillover” effect: Manufacturing companies near one another create a kind of commons. Workers exchange ideas over drinks and at baseball games. They switch jobs, taking their knowledge with them. They draw other companies, who compete to offer them goods and services. It all adds up to a more productive, more innovative economy.
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