Many U.S. firms have long had a simple mantra: “Invent here, manufacture there.” But, increasingly, those same companies are now choosing to invent as well as manufacture abroad. From automotive to semiconductors to pharma to clean energy, America’s innovation centers have shifted east, offering growing evidence that the U.S. has lost what Harvard Business School’s Willy Shih calls the “industrial commons”: indispensable production skills and capabilities. It’s not just that virtually all consumer electronics are designed and made overseas. It’s that the U.S. has lost the underlying capacity to make products like flat-panel displays, cell phones, and laptops; nearly half of the foreign R&D centers established in China now belong to U.S.-based companies.
How the U.S. Can Rebuild Its Capacity to Innovate
The country invests more in R&D than anyone, but it needs manufacturing, too.
October 23, 2018
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Summary.
We know from looking at strong economies around that world that a nation needs both R&D and manufacturing activities to maintain a healthy 21st Century industrial ecosystem. While America has continued leading the world in terms of investment in basic science research, it has lost the ability to do the kinds of process improvements that are essential for innovation. When it comes to manufacturing, the country has lost the capacity for “learning by doing.” Thankfully, for the United States, it should be possible to reverse these developments. We have identified four principles with straightforward steps that policymakers, business leaders, and universities can take to restore innovation ecosystems.