MIT Report: Local Production Essential to Sustainable Regional Innovation Ecosystems

Americans need to rethink their view of manufacturing and the role it plays in regional economies across the country, according to a new report issued by a special Massachusetts Institute of Technology (MIT) commission on innovation. The MIT commission found that many U.S. policymakers and citizens still view manufacturing as a small group of traditional, shrinking industries. However, the commission contends manufacturing is a diverse, evolving group of industries in which new products and knowledge frequently emerge from firms of all sizes throughout the country.

The report also outlines the necessity of diverse, local production in sustainable, vibrant regional innovation ecosystems with an emphasize on collaboration and risk-sharing. To support and build upon the recent growth of national manufacturing, they urge regions to focus their efforts on trying to create public goods — or semi-public, or club goods — in the innovation ecosystem as an approach that may pay the greatest dividends instead of focused clustering strategies. The commission contends that although cluster development has been successful in several regions, it also has failed in many more.

Supported by new research, they suggest co-located interdependencies among complementary activities produce higher rates of growth and job creation. They also provide several original case studies of regions that have been successful with focused diversefied, collaborative initiatives to support their claims. These initiatives are driven by a private company or a public institution that performs a convening function that puts new resources on the table for local startups and small manufactures. In return, these firms must contribute to the pot in some manner. This would reduce risk and increase opportunity for all regional actors involved and allow new industries to develop organically.

A working group focused on advanced manufacting workforce development and availability painted a bleak portrait of the existing labor market in regions across the country. According to survey data from roughly 1,000 manufacturing firms, only seven percent of respondents in firms thought skill requirements for manufacturing have increased significantly in the last five years. Twenty percent of manufacturing firms surveyed also reported long-term job vacancies (of three months or more), equivalent to about five percent of core production jobs.These results were driven predominately by a lack of regional workforces with adequate skills and a lack of regional networks to connect small manufacturing firms with skilled workers.

The report — Production in the Innovation Economy — is the result of a multi-year study of in-depth research and interviews of hundreds of manufacturing firms across various industrial sectors, ranging in size from high-tech startups to small, main street manufacturers and multinational corporations. Conducted by the 21-person commission, comprised mostly of MIT faculty, the study addressed questions including:

• What innovations firms had attempted to deliver to market in the last five years?
• Which elements of a successful firm (e.g., capital, skilled workers, suppliers or expertise) were difficult to find over that period?

This report acts as a preview for two books on the subject that will be published by MIT Press in the fall of 2013. Read the report...