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Producing Prosperity: Why America Needs a Manufacturing Renaissance
Manufacturing’s central role in global innovation
Companies compete on the decisions they make. For years—even decades—in response to intensifying global competition, companies decided to outsource their manufacturing operations in order to reduce costs. But we are now seeing the alarming long-term effect of those in many cases, once manufacturing capabilities go away, so does much of the ability to innovate and compete. Manufacturing, it turns out, really matters in an innovation-driven economy.
In Producing Prosperity , Harvard Business School professors Gary Pisano and Willy Shih show the disastrous consequences of years of poor sourcing decisions and underinvestment in manufacturing capabilities. They reveal how today’s undervalued manufacturing operations often hold the seeds of tomorrow’s innovative new products, arguing that companies must reinvest in new product and process development in the US industrial sector. Only by reviving this “industrial commons” can the world’s largest economy build the expertise and manufacturing muscle to regain competitive advantage. America needs a manufacturing renaissance—for restoring itself, and for the global economy as a whole.
This will require major changes. Pisano and Shih show how company-level choices are key to the sustained success of industries and economies, and they provide business leaders with a framework for understanding the links between manufacturing and innovation that will enable them to make better outsourcing decisions. They also detail how government must change its support of basic and applied scientific research, and promote collaboration between business and academia.
For executives, policymakers, academics, and innovators alike, Producing Prosperity provides the clearest and most compelling account yet of how the American economy lost its competitive edge—and how to get it back.
Companies compete on the decisions they make. For years—even decades—in response to intensifying global competition, companies decided to outsource their manufacturing operations in order to reduce costs. But we are now seeing the alarming long-term effect of those in many cases, once manufacturing capabilities go away, so does much of the ability to innovate and compete. Manufacturing, it turns out, really matters in an innovation-driven economy.
In Producing Prosperity , Harvard Business School professors Gary Pisano and Willy Shih show the disastrous consequences of years of poor sourcing decisions and underinvestment in manufacturing capabilities. They reveal how today’s undervalued manufacturing operations often hold the seeds of tomorrow’s innovative new products, arguing that companies must reinvest in new product and process development in the US industrial sector. Only by reviving this “industrial commons” can the world’s largest economy build the expertise and manufacturing muscle to regain competitive advantage. America needs a manufacturing renaissance—for restoring itself, and for the global economy as a whole.
This will require major changes. Pisano and Shih show how company-level choices are key to the sustained success of industries and economies, and they provide business leaders with a framework for understanding the links between manufacturing and innovation that will enable them to make better outsourcing decisions. They also detail how government must change its support of basic and applied scientific research, and promote collaboration between business and academia.
For executives, policymakers, academics, and innovators alike, Producing Prosperity provides the clearest and most compelling account yet of how the American economy lost its competitive edge—and how to get it back.
192 pages, Hardcover
First published September 25, 2012
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Displaying 1 - 3 of 3 reviews
December 19, 2012
"R&D is a critical part of the innovation process, but it is not the whole thing. Innovation is about moving the idea from concept to the customer's hands. For some highly complex products (flat-panel displays, PV cells, and biotechnology drugs, to name a few) the transfer from R&D into production is a messy affair, requiring extremely tight coordination and the transfer of learning between those who design and those who manufacture. If you do not understand the production environment, you have a harder time designing the product. In these settings, there are strong reasons to co-located R&D and production." (15)
"Between 1990 and 2008, 97.7 percent of employment growth in the United States took place in the nontradable sectors (and of this, 40 percent was due to government and health care). In the internationally tradable sectors, employment growth was essentially flat, and only in high-end services such as management and consulting services, banking, computer systems design, and insurance was there growth. This growth, however, was completely offset by job losses in the manufacturing sector." (32-3)
"How can you know whether a given product has high or low degree of R&D-manufacturing interdependence and whether moving production halfway around the world, far from R&D operations, will hurt a company's (and country's) ability to innovate over the long term? You need to look at two things: the ability of R&D and manufacturing to operate independently of each other (the degree of modularity) and the maturity of the manufacturing-process technology." (63)
"Competitors are believed to be as many as four to five years behind Intel in being able to produce similar chips [fin field effect transistors]. Why? The manufacture of these chip requires a new twenty-two-nanometer process to make the chips. Because Intel controls its own manufacturing and developed a proprietary process to make the chips, its chip designers could better understand the opportunities and limitations of the new process technology than their counterparts at rival companies that had outsourced manufacturing." (69)
"Between 1992 and 2010, total R&D spending increased by 186 percent, whereas dividends and stock buybacks increased by 341 percent (buybacks alone increased 777 percent). But capital expenditures increased only 50 percent." (93)
"How can the government know in which areas to invest? Isn't this just 'targeting' under a different guise? We are not talking about investments in specific technologies (e.g., solar-photovoltaic or lithium ion battery production) by specific firms. We are talking about investments in broad technological capabilities (e.g., advanced materials, nanotechnology, biomanufacturing) that underpin a broad array of potential commercial products." (127)
"Between 1990 and 2008, 97.7 percent of employment growth in the United States took place in the nontradable sectors (and of this, 40 percent was due to government and health care). In the internationally tradable sectors, employment growth was essentially flat, and only in high-end services such as management and consulting services, banking, computer systems design, and insurance was there growth. This growth, however, was completely offset by job losses in the manufacturing sector." (32-3)
"How can you know whether a given product has high or low degree of R&D-manufacturing interdependence and whether moving production halfway around the world, far from R&D operations, will hurt a company's (and country's) ability to innovate over the long term? You need to look at two things: the ability of R&D and manufacturing to operate independently of each other (the degree of modularity) and the maturity of the manufacturing-process technology." (63)
"Competitors are believed to be as many as four to five years behind Intel in being able to produce similar chips [fin field effect transistors]. Why? The manufacture of these chip requires a new twenty-two-nanometer process to make the chips. Because Intel controls its own manufacturing and developed a proprietary process to make the chips, its chip designers could better understand the opportunities and limitations of the new process technology than their counterparts at rival companies that had outsourced manufacturing." (69)
"Between 1992 and 2010, total R&D spending increased by 186 percent, whereas dividends and stock buybacks increased by 341 percent (buybacks alone increased 777 percent). But capital expenditures increased only 50 percent." (93)
"How can the government know in which areas to invest? Isn't this just 'targeting' under a different guise? We are not talking about investments in specific technologies (e.g., solar-photovoltaic or lithium ion battery production) by specific firms. We are talking about investments in broad technological capabilities (e.g., advanced materials, nanotechnology, biomanufacturing) that underpin a broad array of potential commercial products." (127)
August 7, 2017
I read this partly on a bullet train ride in Taiwan so the ideas about innovation and economic development were vivid with rice paddies and semiconductor fabs flying by at 200 mph. I also emailed the authors and one got back to me, that was neat.
June 3, 2025
3.5⭐. Durante las últimas décadas la economía de Estados Unidos ha cambiado radicalmente. Las industrias, que representaban el 25% de los empleos, trasladaron sus fábricas a países asiáticos donde la mano de obra es más barata y, en consencuencia, el sector perdió importancia para dar paso a los servicios. Los autores sostienen que con esta pérdida también se está viendo afectada la capacidad de innovar del país, ya que las industrias no existen en el vacío sino en un ecosistema de capacidades, trabajadores calificados y empresas proveedoras. Aunque la I+D de la empresa siga en Estados Unidos, su capacidad de producir innovaciones se reduce al estar separada de la fabricación, hasta un posible punto en el que ya no puede innovar.
Displaying 1 - 3 of 3 reviews