The What, Why, and Will They Help of these New Institutes for Manufacturing Innovation

January 16th, 2014 at 5:06 pm

So what the heck are these “manufacturing innovation institutes” that the President has been going on about?  Do we need them?  Will they help add to jobs in this key sector?

I’ll explain what they are in a moment, but ‘yes’ we need their function to fill an important missing part of our innovation-to-production chain—an omission that’s uniquely American, as in many of our competitors are already filling this gap—and they have the potential to add jobs, though that’s to be seen.

What: The White House, in partnership with universities and the private sector, has begun the development of a national network of Institutes for Manufacturing Innovation (IMIs), designed to accelerated the discovery and application of cutting edge technologies to enhance the scope, size, and competitiveness of US manufacturers.

There are two of these IMIs so far, one in Youngstown, OH, focused on additive manufacturing, aka 3D printing, and the one he christened yesterday in on the campus of NC State focusing on increasing energy efficiency in micro processing, an advance that would have applications in motors, consumer electronics, and even power grids.

The institutes are essentially labs where applied academic researchers will team up with engineers from industry to develop and move these technologies from the lab floor to the production floor.

Why: Huh?  Why do we need to do that, and why does the government need to get involved?  Where’s the market failure?

There’s historically a gap, sometimes a deadly one, between technological innovations made by academic computer scientists and engineers working on solving broad problems—like a more efficient chip, a robotics problem, a non-specific 3D printing challenge—and the adaptation of the discovery to a narrow production use practiced by a factory making a specific product.  A team of scientists might come up with a great advance in lighting technology but not go the next step toward figuring out how it can power a panel display in a laptop, much less how their innovation can be massproduced for that display.

Unfortunately, it’s all too easy to find advances we’ve made here—in advanced battery research, oxide ceramics, semiconductors, robotics, solar cells, and more—that were largely commercialized elsewhere.

The hope is that these IMIs will fill that gap by creating an end-to-end alignment between the lab and the factory where commercial production occurs.  Even large manufacturers can’t always figure out a profitable way to support broad research like this, where significant investments might well not pay out for years, and smaller firms don’t have a chance.  There’s your market failure.

Germany’s got 60 of these labs, btw…South Korea’s got a bunch on ‘em.  The Ohio alliance that set up the first IMI was supported by 86 companies, 10 research universities, workforce development agencies (skills training is another part of this puzzle), and nonprofits invested in regional development.  That last part represents an effort to build regional clusters around the IMIs, where manufacturers up and down the supply chain interact with researchers and a customized, skilled workforce around the IMIs specific focus.

Will They Help?: Like I said, we didn’t invent this—it’s a bridge/alignment function that other advanced economies recognized as necessary and important years ago.  So I’m quite certain these IMIs will prove useful.  The Youngstown lab has already made interesting inroads in workforce development, placing 3D printers in schools, reaching 100,000 students so far.

But it’s jobs that matter most to many of us thinking about this, and clearly that’s key to the President’s rap.  It seems to me that if these innovations lead to significantly more domestic production of manufactured goods demanded here and abroad, their production will require more employment.  That may sound obvious, but I’m sure some readers will think that productivity enhancements would obviate new jobs.  The question is will these efforts generate more demand than the productivity gains could absorb.  I suspect so, but that’s an unknown.

In fact, there are numerous “ifs” in this equation and a critical part, one the White House says little about, is reducing our trade deficit in goods.  That is, we mustn’t assume that even if we get the innovation supply chain right, everything else falls into place, e.g., competitors cease managing their currencies to keep our exports to them expensive and their exports to us cheap (see here).

That said, at the end of the day, and in a political climate where Congressional Republicans are poised to oppose any job initiatives of this White House, these IMIs, funded thus far from agency budgets and private industry (the Youngstown lab took root with $30 million from the government and $40 million from the private sector), represent a smart initiative worth keeping a close eye on.

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8 comments in reply to "The What, Why, and Will They Help of these New Institutes for Manufacturing Innovation"

  1. Larry Signor says:

    I don’t see the present benefit of IMI’s to our current economic disturbance. It may prove a marginally successful program for a limited portion of our economy, but does it enhance the macro development? Or is it a political salve to the globalization of American jobs?

  2. purple says:

    Manufacturing requires a lot of public policy to support it, not just the inventions. The polices of Thatcher were not solely vindictive, but about moving UK to a FIRE economy. The U.S. is basically a FIRE economy now too, and that requires a certain political position regarding trade and the strength of the dollar. Though factually the U.S. did quite well with high tariffs and no income tax for a good part of its existence.

  3. mike smitka says:

    Such centers undertake research, but my own valuation (as I work on reports as a judge for the Automotive News PACE supplier rewards that focus on innovation) is that the diffusion of knowledge and hands-on training of researchers is of even more value. Firms are really reluctant to hire someone and then send them off to a lab for a year or two; having a coterie of individuals who can run seminars aimed at engineering managers is also helpful in getting them to sensibly allocate resources. Again, my sense is that seminars can’t charge enough to pay an experienced engineer a competitive wage, but you really do need such direct communication to help filter and provide a chance for interaction and networking – the web isn’t good if you don’t know what you need to look for and do need to have a stack of business cards of people who would in turn recognize your name.

  4. BL Davis says:

    Many products and new technologies in the USA have been the result of governmnet funding. Think of NASA. Government funding of both the researchers and their research is particularly necessary now since our major corporations have cut their own investment in Research and Development in order to raise profits (and therefore CEO salariess) via stock buybacks. While the Fortune 500 may believe in short term policies that focus only on next quarters’ profits, the government of the United States must think more long term. Actually, the government should be incentivizing corporate America to think long term as well.. .

  5. BL Davis says:

    Many products and new technologies in the USA have been the result of governmnet funding. Think of NASA. Government funding of both the researchers and their research is particularly necessary now since our major corporations have cut their own investment in Research and Development

  6. Mory Creighton says:

    It’s clear that something needs to happen in order to grow the manufacturing sector in the U.S. Government funding could be the answer. All initiatives require an up front investment. At the same time, a smart and coordinated approach to investments is needed to boost manufacturing innovation. Where else could it come from?