Recent Research: Close look at manufacturing helps shape policy and practice

Last week, SSTI highlighted the recently released issue of the Economic Development Quarterly where three pieces stand out for their relevance to practitioners and policymakers. This article takes a look at how academic research can inform three common strategies for strengthening the manufacturing sector and encouraging regional economic development: targeting industry clusters, leveraging manufacturing extension services, and promoting workforce development.

In one EDQ article, University of Massachusetts professor Henry Renski focuses on Estimating the Returns to Professional Certifications and Licenses in the U.S. Manufacturing Sector. Renski uses microdata from the Current Population Survey (CPS) and the Adult Training and Education Survey (ATES) to estimate the earnings premium that is associated with professional certifications and licensing. He finds that full-time manufacturing workers with professional certifications or licenses earn close to $200 more per week than those without. When controlling for characteristics such as race, gender, age, and formal education, which explain roughly two-thirds of the average earning gaps between certified and licensed workers, this premium is closer to $71 per week for the typical manufacturing worker. 

Notably, Renski finds evidence that the increase in weekly earnings is larger for workers with no high school or college education compared to those with more advanced degrees. This finding is important, he notes, because it shows that non-degree credentials may offer a promising path to economic security for low- and middle-skilled workers. Renski concludes by encouraging other researchers to utilize the granular CPS data to determine broader impacts of licensing and certification in the manufacturing industry, such as tracking programmatic goals or helping community colleges identify possible training gaps.

A second article in the recent EDQ looks at how the types of services offered by centers within the NIST Manufacturing Extension Partnership impact outcomes. In the study, authors Phillip Brandt, Andrew Schrank, and Josh Whitford draw on administrative data from the MEP program and extensive interviews with “street-level bureaucrats,” representatives from centers who interact directly with companies. The authors use this data to map the variation in service delivery across centers by analyzing panel data on center relationships with clients and outside experts.

Their analysis shows that centers and clients that rely on third-party service providers tend to have stronger ties; when manufacturers have a strong relationship with MEP agents, they are also more likely to develop strong relationships with the third-party service providers referred to them by the centers. Alternatively, when they have weaker relationships with the MEP agents, their interactions with centers are more likely to be one-off in approach. Brandt, Schrank, and Whitford conclude by noting that an important role for MEP centers is to address the network failures that negatively affect manufacturers, and not just market failures. They find evidence that the MEP center projects generating the most impact oftentimes focus on “getting the relationships right” and making the proper referrals.

A third article, by Florida State professor Li Fang, examines Manufacturing Clusters and Firm Innovation. Using establishment and patent application data over a 10-year period, the study looks at how – and at which geographic scales – different manufacturing clusters encourage innovation. In particular, Fang focuses on how the presence of a cluster influences innovation, as measured by citation-weighted, per-capita establishment patent applications. With a focus on Maryland’s cluster portfolio, Fang finds that most clusters exhibit their strongest effects on per-capita establishment patent applications in a 1-mile radius, the smallest level she analyzes. The differences in effects vary greatly across industry, with the top cluster, metalworking technology, when formed at an optimal 3-mile radius, is associated with 17.6 percent more citation-weighted patent applications in an average firm.

These findings may offer two messages to policymakers and practitioners, according to Fang. Because manufacturing clusters tend to have a larger impact on innovation at smaller scales, cluster policies might be more effective if they also consider proximity. Furthermore, if economic development practitioners consider patent filings important, then some industries may be more worthwhile to target than others may. Practitioners and policymakers can utilize the methodology employed by Fang in states and localities besides Maryland as a way to determine additional effects of manufacturing clusters on innovation.

Ultimately, academic research does not need to exist in a vacuum. When communicated appropriately and to the right audiences, this research has the power to transform the ways we conduct our work for the better. Although these three articles differ in size and scope, they have an important element in common: academic research informing common economic development policy recommendations. For practitioners focusing on workforce, the finding that relative impacts are greater for less-educated workers may help focus programs on the right clients. For manufacturing extension centers, the notion that third-party referrals actually boost ties between centers and clients may be transformative. Targeted industry clusters are a part of nearly every major region’s economic development strategy, so the research on proximity and innovation may help inform these plans moving forward.