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Monday, 25 July 2011

Location Matters in Manufacturing

Technology Review
July 24, 2011

The migration of manufacturing from the United States to Asia could be having a significant impact on which advanced technologies are commercialized. Specifically, there is evidence that the shift in manufacturing is curtailing the development of emerging technologies in areas such as optoelectronics and advanced materials for the automotive industry.

In studies with colleagues at MIT, Erica Fuchs, an assistant professor of engineering and public policy at Carnegie Mellon University in Pittsburgh, shows that the relocation of component manufacturing from the United States to East Asia in optoelectronics and to China in composite body parts for automobiles changed the economics of producing the technologies. The result in both cases is that emerging technologies developed in the United States were not economically viable to produce in the Asian countries because of differences in manufacturing practices. And Fuchs suspects similar effects are happening more generally as production shifts to the developing world. Location matters for "which products will be economically viable, which products countries will be most competitive in producing, and which products countries and companies globally are most likely to develop," she says.

The findings add to a growing awareness that manufacturing plays a critical role in driving innovation. Harvard Business School professors David Pisano and Willy Shih argue, for example, that innovation capacity often disappears if a country loses its manufacturing sector, because the knowledge and abilities needed to develop new technologies are often closely linked to the skills and expertise associated with manufacturing (see "Innovation Depends on a Robust Manufacturing Sector"). Fuchs builds on this idea by showing that regional manufacturing differences can cause the most advanced technologies to fall by the wayside. "Manufacturing locations can affect the evolution of technology globally," she says.
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