Brookings: Experts - Mark Muro

Manufacturing Renaissance Heads to Fort Worth with Motorola Announcement

Scott Andes and Mark Muro — Mon, 10 Jun 2013 15:00:00 -0400

There is no shortage of talk about a supposed “manufacturing renaissance” with advocates ardently touting the return of American manufacturing and skeptics scoffing about recent manufacturing job numbers. So what would a full blown “renaissance” look like?

Odds are it will look like Fort Worth, TX.

How’s that? Well, one little bit of such a possible renaissance was announced recently when the cell phone manufacturer Motorola Mobility—once a pioneer in shifting jobs to China—said that it would open a Texas manufacturing facility to produce its much-awaited new handheld, the Moto X. No, one announcement does not a new era in manufacturing make, but the Motorola announcement—which follows similar ones by other major tech firms, including Apple and Lenovo—is nevertheless an intriguing data point. After all, the Moto X will be the first smart phone manufactured in the United States.

So what’s going on here? Dennis Woodside, the head of Motorola, explains that Texas is a good location between developers in Chicago and Silicon Valley and service and repair center in Mexico and will allow the company to “iterate and innovate much faster.”

Yet, what is interesting is how geographical considerations like those are being reoriented by global technology mega-trends. Under Google’s ownership, after all, Motorola is in the process of reducing the number of cell phone models and narrowing its focus to cutting edge, market making products. Doing so has changed their cost structure to exaggerate the costs of long production lag time, faulty design, or anything but razor-sharp symmetry between production, design, and repair facilities. Moreover, as one of us recently explained, automation and substantially higher transportation and logistics costs in places like China are increasingly driving global cost convergence between U.S. locations and Asian ones.

To be sure, many of the components in Motorola cell phones will still come from abroad. But the higher-end components and production are reshoring. Low-tech manufacturing will continue to go to developing countries (as it should), but a new normal is emerging within advanced manufacturing that is less contingent on labor costs and increasingly focused on keeping up with ever-shorting product life cycles, which demand nimble, relentless, and continuous innovation.

What does this mean for the future? Advanced production may well mean countries with technology competencies will see more onshoring, but that doesn’t necessarily mean the United States will prove preferable to Germany, Japan, South Korea, or other proficient nations.

Instead, the success of U.S. advanced industries will in part be conditional on a political environment that recognizes what types of manufacturing opportunities exist and how to provide for companies like Motorola. This will mean less by way of traditional cash handouts to entice firms and more policies and programs that support R&D, commercialization, tech transfer, STEM workers, and clustering of knowledge-based firms.

Authors

Image Source: © Brendan McDermid / Reuters

Cost Convergence with China: An Energizer for U.S. Manufacturing?

Mark Muro — Mon, 03 Jun 2013 14:14:00 -0400

Is a shrinking cost gap between China and the United States for advanced manufacturing really changing the calculus of location decisions and making possible a “manufacturing renaissance” in the United States?

Optimists like Hal Sirkin of the Boston Consulting Group have been predicting a convergence of labor and other costs—and a resulting U.S. manufacturing revival—for several years, while skeptics like Jan Hatzius of Goldman Sachs still don’t see it.

Yet for all that, hard facts have been in short supply. Instead, the debate has felt a bit disembodied, driven more by theoretical assertions and anecdotes than hard data.

However, a new paper just published in the Journal of Power Sources contains new information about the global advanced battery manufacturing industry derived some fresh reporting: the authors’ face-to-face interviews with managers in battery manufacturing plants in China and the United States.

What does the new paper by Ralph Brodd and Carlos Helou find? By systematically poring through all the major costs of constructing and staffing a stand-alone manufacturing plant for lithium-ion battery cells, Brodd and Helou find that the costs of producing that quintessential advanced manufacturing product in the United States and China are roughly the same.

How is this? According to Brodd and Helou’s exhaustive drill down, U.S. wage costs are clearly higher than those in China, but the heavy automation of a current-practice Li-ion battery plants reduces the number of needed workers, and so reduces that gap. Meanwhile, while materials costs in the United States and China are identical, China’s high energy and logistics prices essentially erase China’s price advantage. On the energy front, Brodd and Helou’s reporting concludes that a facility producing 350 million battery cells in China would have approximately $1.5 million higher electricity costs than one in the United States. Relatedly, they note that high energy prices and fragmentation in the Chinese logistics industry ensure that trucking costs in the country’s two biggest export regions—the Yangtze River Delta region near Shanghai and the Pearl River Delta around Hong Kong—ranged from $2.50 to $3 a mile compared to $1.75 in the United States. These costs reflect China’s profusion of local and provincial road fees as well as the country’s rising trans-Pacific shipping and customs costs.

The upshot: The cost advantage of a Chinese Li-ion battery plant ranges from just 7 cents per unit to 25 cents per unit, compared to a U.S. site, depending on the production volume of the plant. And that leaves aside such other factors as increasing wage rates in China, quality deficits there, and the threat of unexpected supply chain disruptions, all of which would further argue for the cost superiority of a U.S. site. Also left out—and favoring a U.S. facility siting—would be the innovative synergies that may develop when R&D personnel have convenient access to the factory floor as well as the cost premium that may accrue from U.S. consumers’ preference for U.S.-made products.

As to what this all means for the manufacturing comeback debate, it doesn’t necessarily mean that a huge “in-sourcing” boom is coming in America. In the end, the Li-ion battery case is just one data point in the still-thin fact set that underlies the “manufacturing renaissance” claim, and clearly it reflects the relative costs and benefits of one product in one industry. Still, the new information clearly suggests, as Brodd and Helou conclude, that U.S. manufacturers—as they look to the future—may well find it “increasingly attractive and profitable to build highly automated advanced manufacturing facilities in the U.S.—nearer their R&D facilities and closer to their consumers.”

In the meantime, the complexity of the moment makes it urgent that more up-to-date, thoroughly researched, and industry specific analyses such as Brodd’s and Helou’s be prepared so siting analysts and policymakers have real information to go on as decisions are made.

Authors

Mark Muro

Image Source: © Mike Blake / Reuters

Strengthening U.S. Manufacturing, Region by Region

Mark Muro — Mon, 13 May 2013 16:17:00 -0400

Last week President Obama used his trip to Austin, TX to announce the creation of three more public-private manufacturing research institutes as nodes of a $1 billion National Network for Manufacturing Innovation (NNMI). On the same day, though, there was another intriguing if lower-key announcement on the Obama administration’s manufacturing agenda.

That’s the new Investing in Manufacturing Communities Partnership, the first phase of a two-phase effort aimed squarely at communities and regions, announced by the Commerce Department’s Economic Development Administration (EDA).

Focused squarely on the fact that the locus of U.S. manufacturing prowess is emphatically local and regional, the new competitive solicitation will allow as many as 25 local communities to be awarded $200,000 this year to create smart strategies for leveraging and aligning their public- and private-sector assets to provide a promising environment for advanced manufacturing. These awards will in the near term allow ambitious communities to develop “bottom-up” plans for strengthening their regions’ intellectual, human, and physical infrastructure.

But beyond that, the small grants and the resulting regional strategies will also help prepare a cadre of U.S. regions to compete for the second phase the partnership, which will next year entail a competition that will award (contingent on congressional support) five to six U.S. communities with up to $25 million for the implementation of regional advanced manufacturing strategies. That’s real money that would—like the full build-out of the NNMI initiative—allow for real strides in advancing U.S. manufacturing in the country.

Yet, while such material awards would be welcome, what is key to the Manufacturing Communities Partnership is its four-square focus on the local and regional angle. For several years now we at the Metro Program have been harping on the sub-national underpinnings of manufacturing competitiveness and the importance of recognizing those underpinnings, establishing state and regional innovation centers to foster them, and making sure to embed regional advanced industries hubs in their surrounding industry clusters and supply chains. Most recently my colleagues Bruce Katz and Peter Hamp proposed creating a “Race to the Shop” competition aimed at calling forth bold regional visions for advanced industry growth, rewarding those visions, and better organizing disparate federal programs in support of the strategy.

We believe all of this is critical because advanced industry dynamism does not grow up just anywhere. Rather, industries reach critical mass in places—most notably, metropolitan places—where firms and workers tend to cluster in close geographic proximity whether to tap local supplier networks, work with local research institutions, draw on local workers, or profit from formal and informal knowledge transfer. In this respect, smart companies are more and more deciding where to locate facilities and hire workers based on the quality of a community’s infrastructure, institutions, and human capital—what the Harvard Business School scholars Gary Pisano and Willy Shih call its “industrial commons” and others its “industrial ecosystem.” The upshot: If U.S. regions—working with their states and the federal government—can bolster the density, efficiency, and vitality of the nation’s regional industrial clusters they will add to overall advanced industry competitiveness.

Broadly then, the EDA and its agency partners are not restricting themselves solely to broad (and needed) national and macro-economic policies on research, trade, taxes, and regulations. Instead, by going local, they are getting at the regional sites in communities where manufacturing supply chains actually come together and generate prosperity. That’s a good place for federal manufacturing policy to be.

Authors

Mark Muro

Image Source: © Aaron Josefczyk / Reuters

DOE’s Clean Energy Manufacturing Initiative Leverages Regions

Scott Andes and Mark Muro — Mon, 06 May 2013 17:26:00 -0400

This spring, the U.S. Department of Energy (DOE) is launching a new Clean Energy Manufacturing Initiative that will support both clean energy and manufacturing competitiveness by promoting greater energy efficiency in the U.S. production sector. Rolled out at Oak Ridge National Laboratory (ORNL) in Tennessee last month, the new initiative advances a smart take on both the nation’s energy and manufacturing strategies. But more than that it reflects a welcome new spatial and geographic emphasis at the Energy Department.

At the most general level, the new initiative marshals a number of DOE offices, research institutions, and private sector partners to map out and implement networks that promote clean energy production and energy-efficient manufacturing. Key to the effort is that this new push—like the Obama administration’s National Network for Manufacturing Innovation (NNMI) proposal—takes an explicitly regional approach to innovation and the diffusion of next-generation technologies.

In this respect, the initiative aims to engage with regional epicenters of advanced manufacturing such as smart automation in Austin, Tex. and low-heat stamping in Denver, Colo. to drive local and national advances. These areas have established production ecosystems and are driving the technological frontier within clean energy; they are prime sites of U.S. innovation. Along these lines, the initiative has already awarded a total of $15 million to five projects in five different regional manufacturing clusters.

Yet the new focus is not just about covering the geographic bases. By supporting centers of excellence close to regional industrial clusters, DOE is leaning on a large body of literature that suggests innovation results from an iterative set of exchanges between production and research activities that more often than not thrive on proximity.

To be sure, old-line thinking continues to maintain that R&D facilities develop prototypes out of whole cloth and then transfer design requirements to manufacturers, wherever in the world plants are located. However, while this may be the case for low-tech industries, the reality for advanced industries is often the other way around. The genesis of many new technologies comes from within the production process via daily interactions with production facilities. These “co-location synergies” emerge as manufacturers adopt new techniques and equipment to increase efficiency and R&D engineers build upon shop-floor technological competencies to create innovate products and services. And within strong regional clusters, particularly metropolitan regions, such co-location benefits are able to penetrate beyond the incumbent R&D performing firm into the local supply chain—creating high-value start-ups and upstream innovation.

And in fact the ORNL launch event highlighted all of this. Led by Assistant Secretary for Energy Efficiency and Renewable Energy (EERE) Dave Danielson with Tennessee Gov. Bill Haslam in attendance, the event highlighted both a very cool DOE facility—the Carbon Fiber Technology Facility (CFCF) at ORNL—and EERE’s emergent regional stance. CFCF is a production line-sized test bed for public and private sector researchers to explore new carbon fiber composites at scale. As such, it offers to both East Tennesssee and the nation a one-of-a-kind piece of shared industrial infrastructure as well as a focal point for local technical exchange. Currently, for example, 45 firms make up the carbon fiber composite consortium that work with CFCF researchers—many of which are small-and medium-sized firms located in East Tennessee. In that way, the CFCF is emerging as the hub of an nascent “industrial commons,” where firms of all sizes can leverage not only CFCF resources but the broader R&D infrastructure at Oak Ridge, the University of Tennessee, and in firms. In other words, the carbon fiber hub and cluster being fostered in East Tennessee—like Austin and Denver—epitomizes the increasingly “bottom-up” feel of U.S. and global innovation systems and likewise highlights a new region-oriented stance at DOE.

While it’s too early to judge the impact of the Energy Department’s Clean Energy Manufacturing Initiative, the new push looks promising. By focusing more of DOE’s efforts on regions, a historically isolated, sometimes obtuse agency may be beginning to align itself with some of the most dynamic technology development exchanges of all—those that happen locally.

Authors

Scott Andes
Mark Muro

Image Source: © Jason Reed / Reuters

Revving Up Manufacturing, Region by Region

Mark Muro and Jessica Lee — Thu, 11 Apr 2013 14:44:00 -0400

For some time now we’ve argued that one of the best ways to drive innovation and economic growth is by connecting critical R&D-focused anchor institutions—like the Department of Energy’s Energy Innovation Hubs or the Advanced Industries Innovation Hubs that we advocated establishing earlier this year—to broader regional strategies that seek to strengthen a region’s innovation ecosystem. In providing intentional support for regional innovation clusters, such strategies nurture these major centers of research by fostering knowledge sharing and spillovers, expediting technology transfer and commercialization, and fostering entrepreneurialism.

Now, a pair of items in the new Department of Commerce budget has picked up on that logic by placing side by side two welcome manufacturing policy initiatives.

Going beyond its funding request for the proposed $1 billion investment in a National Network of Manufacturing Institutes, the first of which was launched in Youngstown, Ohio last August, the budget also calls for the creation of a $113 million Investing in Manufacturing Communities Fund to reward and support regions that develop strategies “that build on the region’s comparative advantages and leverage private-sector resources.” Through these twinned proposals, the Commerce budget seeks funding not only to establish new manufacturing innovation institutes but also to provide incentives for manufacturing-strong regions to craft what are in effect metropolitan business plans—carefully tailored strategies that help regions strengthen their economies by capitalizing on their distinctive assets and attributes.

We’re encouraged that these proposals made it into this year’s budget request. Ideas like the Investing in Manufacturing Communities Fund offer a glimmer of the kinds of smart thinking needed to boost economic growth, one region at a time.

And though the fate of this particular budget request is uncertain at best, it points to the types of pragmatic action that production-oriented metros can take on their own to make the most of their manufacturing prowess and strengthen their economies in the process.

Authors

Mark Muro
Jessica Lee

Jobs Alone Do Not Explain the Importance of Manufacturing

Scott Andes and Mark Muro — Wed, 03 Apr 2013 12:41:00 -0400

When it comes to American manufacturing the U.S. media seems a bit confused. Last year, a bunch of stories (example here) argued that manufacturing job losses over the last decade don’t matter because productivity looks so good. Now, stories like this one are suggesting that manufacturing itself doesn’t matter much after all because the sector isn’t creating enough jobs. The current argument in vogue maintains that job growth figures just haven’t been robust enough in manufacturing to warrant policies that support the sector.

What the authors miss is mass employment is not the fundamental reason we need a healthy and vibrant manufacturing sector. Manufacturing—or rather advanced manufacturing—is essential to the U.S. economy because it is the main source of innovation and global competitiveness for the United States. Simply put, advanced manufacturing is the U.S. pipeline for new products and productivity-enhancing processes. While the sector makes up just 11 percent of the economy, manufacturers conduct 68 percent of private sector R&D, as reported by our colleagues Sue Helper and Howard Wial last year. And on average, they noted, 22 percent of manufacturers introduce new processes to increase productivity compared to just 8 percent of non-manufacturers. This is important because innovation that emerges from America’s manufacturing sector also fuels growth within the service sector because intermediary goods—the machines used by services (e.g. automated self check-out kiosks at grocery stores)—drive service sector productivity.

Some ask, meanwhile, why the nation should not simply import the advanced machinery needed for service-sector productivity. The problem with this argument is that services are, and will remain, largely non-traded. Regardless of how productive services become, the sector’s growth will be tethered to domestic demand. No amount of efficiency will allow a domestic grocery store to service international consumers. If the U.S. economy becomes one in which the U.S. imports all of the machinery that makes the service sector productive and no longer export any products of our own then inevitably we will consume more than we produce and incomes in services and manufacturing will decline. This is overwhelmingly clear in recent trade statistics. In 2012 manufacturing represented roughly 60 percent of U.S. exports despite only being 11 percent of the economy. By punching far about its weight class in exports the manufacturing sector is vital to U.S. global competitiveness.

In sum, the number of jobs within manufacturing is important, but taken by themselves employment figures miss the real reason manufacturing is an American imperative. U.S. quality of life, the ultimate benchmark of the direction of the economy, is contingent upon the competiveness of our traded sector and the speed at which innovative products and processes reach the market. On both metrics manufacturing is essential.

Authors

Scott Andes
Mark Muro

Flow Oil and Gas Revenues to Cleantech R&D: Common Ground on Energy?

Mark Muro — Mon, 18 Mar 2013 00:00:00 -0400

Can Congress pass any sort of energy legislation? I’m not holding my breath. For too long now meaningful action through compromise has been a chimera. Even the most plausible deals have been dissipated by ideological tribalism.

Still, there remain potential convergence points.

Last month the Bipartisan Policy Center advanced more than 50 middle-of-the-road energy policy recommendations developed by its Strategic Energy Policy Initiative, co-chaired by former Sen. Byron L. Dorgan (D-ND) and former Senate Majority Leader Trent Lott (R-MS). And for that matter, interesting discussions surround energy efficiency issues, thoughtful subsidy reform, and steps like opening master limited partnership status to renewable energy projects.

Now comes President Obama’s modest proposal to capitalize an Energy Security Trust fund to support research into de-carbonizing the vehicle sector.

To be funded with $2 billion over 10 years drawn from royalties the government receives from offshore drilling on the Outer Shelf, the new proposal—first aired in Obama’s State of the Union address last month—represents an important check point on the potential for constructive action through compromise in Congress.

To be sure, the proposed research fund is tiny, given the scale of the nation’s cleantech research needs. And yes, it’s focused only on the transportation sector. And yes, the proposal is quite vague and so hard to gauge.

But even so, the energy trust concept represents a significant bid to test the potential for advancing energy policy.

Research on clean energy technologies remains a critical priority. Locating funding for it remains a critical challenge. And the president’s proposal probes an area of genuine potential for convergence.

For one thing a modest bargain on energy research and oil and gas royalties has always had a sound intellectual grounding. Through such an architecture the costs of investment would be internalized across the energy sector, and the revenues of “dirty” exploitation would be used to fund clean innovation. That just makes sense.

Beyond that there is the fact that the concept has some authentic bipartisan lineage and maybe traction. Some of that comes from the support for the idea by a group of retired military and business leaders, including some Republicans, called Securing America’s Future Energy. More importantly, Sen. Lisa Murkowski (R-Alaska), the top Republican on the Senate Energy Committee, has proposed a similar idea (albeit one focused on drilling on lands now off-limits, such as the Arctic National Wildlife Refuge in Alaska). This convergence might well mean there is room to negotiate a deal that pleases both sides, especially with royalty growth likely in the coming years.

Or, maybe not. Perhaps the Energy Security Trust is just another illusion of plausible potential compromise, soon to evaporate.

Yet, there is encouragement in something called the American Energy Act, the 2009 energy plan introduced by House Republicans under the leadership of Rep. John Boehner, now speaker of the House. At the center of that plan was a proposed bargain that would have paired expanded oil and gas drilling and nuclear development with new investments in renewable and alternative energy. To fund the latter the bill proposed putting hundreds of billions of anticipated new oil and gas royalties into a trust fund to accelerate clean energy innovation. Sound familiar?

That proposal may have been mostly a rhetorical counter to the big Democratic push on cap-and-trade legislation, but it was discussed widely by GOP leadership and represents a useful precedent for a new deal now.

So, we’ll have to see. Whether it’s called an Advanced Energy Trust Fund a la Sen. Murkowski or an Energy Security Trust as per the White House, a clean energy R&D fund for the transportation sector remains a meaningful test of whether there is any room at all for significant energy legislation in Congress.

Again, I’m not holding my breath. But I’m happy to be proven wrong.

Authors

Mark Muro

Sequestration Shock: Smart D.C. Metro Will Figure It Out

Mark Muro and Jessica Lee — Tue, 12 Mar 2013 13:00:00 -0400

Washington Post economic correspondent Jim Tankersley had a smart piece last week that brought home the potential economic implications of the sequester’s across-the-board federal spending cuts for the Washington, D.C. region.

Employing numbers crunched by my group at the Metropolitan Policy Program, Tankersley noted that of the 3.1 million people employed in the Washington area, nearly 450,000 work for the federal government or the military.

That means that fully 14 percent of the region’s workers work directly for the federal government—at a time when no other large U.S. metro area has more than 3 percent federal employment. The thrust being that the region’s economy is grossly over-reliant on the federal government, especially since these numbers leave out the additional hundreds of thousands of federal contract workers.

The implication of Tankersley’s piece: A decade of expanding federal largesse that protected the region from the worst effects of the financial crisis has now left the region vulnerable. The scary part: With sequestration, a deflation of the federal spending bubble could have implications for the greater Washington economy not unlike those of the mid-decade auto-industry crisis for Detroit or the housing crash for Las Vegas.

And yet, while all of that sounds distressing, we are not so worried. For one thing, while the region will be hit inordinately, the federal pullback likely will not be abrupt. It appears to be more of a slowdown than a crackup.

But beyond that, Washington possesses the ultimate counter to adversity: It is loaded with smart people—and smart people tend to figure things out.

In this regard, D.C. boosters are right that the region boasts one of the greatest concentrations of technical and knowledge workers in the country. Almost 47 percent of workers in the D.C. metro possess a bachelor’s degree or higher, while roughly 32 percent of adults in the United States do. This is important because people with higher levels of education tend to be more adaptable to the vagaries of the labor market, more able to translate their existing skills to new pursuits, and more entrepreneurial.

True, too much of this talent is now tied up in the government sector, as the Post’s Steven Pearlstein complains, where the staid ethos of agency life and government contracting is “almost antithetical” to the entrepreneurial culture of the private sector. And yet, the region has changed a lot in the last decade, with the emergence of a new urban character comprising a huge part of that change. As Pearlstein notes, Washington has gradually become a cool place for smart, well-educated young people to live. As it happens, that turns out to be a vital ingredient for spawning successful new companies, particularly in tech-heavy fields such as “big data,” social media, cloud technology, and app design. That’s why it’s a big deal that new energy and people are beginning to flow through the nascent innovation districts that are emerging on U Street NW, H Street NE, and along the Rosslyn-Ballston corridor. These relatively affordable yet hip neighborhoods are where the future is being figured out.

And so, while sequestration portends dislocation, and while it would have been best if the region’s leaders had sought to “diversify” the economy before now, diversification may well already be happening organically.

Times may get tougher, but the greater the stress, the more likely it is that the many smart people in this region will sort things out and invent a new Washington.

Authors

Mark Muro
Jessica Lee

Regional Innovation Clusters Begin to Add Up

Mark Muro — Wed, 27 Feb 2013 00:00:00 -0500

One frequent criticism of the Obama administration’s welcome conviction on economic regionalism—epitomized by its programs to stimulate regional industry clusters with small matching grants usually in the $1 million to $2 million range—is that it remains small bore.

It’s true that the enormity of the nation’s economic problems calls for large-scale interventions that transcend the marginal. After all, as we at the Metro Program keep stressing, the nation has a lot of work to do to reorient a drifting U.S. economy beyond consumption and more toward innovation, production, and exports. So no wonder we and others have hankered for more heft in Washington’s economic responses. Surely, for that matter, the desire for more weighty action explains part of the interest that has been generated by the administration’s $1 billion proposal (talked up in the State of the Union address) to create a network of 15 institutes for manufacturing innovation around the nation.

And yet, what if small ball—engaged in persistently—begins to add up to something larger? That was the thought that crossed my mind when I happened onto an intriguing dot map last week that locates no less than “56 federally funded cluster initiatives” scattered across the Lower 48 states and Alaska.

The map yields genuine insight. Arrayed all across the map, the Google map push pins assembled by the Small Business Administration call out an impressive array of future-leaning collaborations aimed at advancing next economy clusters in diverse industries all over America.

There are some 18 advanced manufacturing collaborations, working on new materials, new processes, new control systems, and skills development in places as diverse as East Tennessee and Iowa and Southern Arizona and greater Philadelphia. There are 10 clean energy technology projects ongoing in Southeast Michigan, Florida, San Diego, Oregon, the Carolinas, and elsewhere. There are initiatives working to rally various actors in the food industries of New England, Bristol Bay, and the Finger Lakes region. And there are other efforts focused on IT, the space economy, water technology, and wood products—all collaborative, all aimed at convening the actors in a regional cluster, coordinating disparate efforts, and reducing the risks of innovation and investment.

Nor is that all. Beyond all of that, another map on the Economic Development Administration website identifies another 19 regional innovation projects that have been funded through the EDA’s i6 program. Similar to the cluster efforts, the i6 effort provides matching support to innovative initiatives that propose accelerate technology commercialization, new venture formation, job creation, and economic growth in U.S. regions.

The inescapable conclusion: Proliferating under the radar, the Obama administration’s “small bore” regional initiatives in economic development are beginning to add up to something meaningful. As of now some 74 cluster initiatives and region-focused innovation efforts are underway, helping to catalyze more linked effort and creative economic development in the nation’s regional centers of innovation. Through these initiatives some $250 million is being used to raise matching money and catalyze regional efforts to strengthen the nation’s regional innovation ecosystems.

To be sure, it’s a big country, and the cluster grants remain tiny. But the fact remains, as Bruce Katz and I have discussed, that well-designed cluster and accelerator strategies—ones that require sizable local matches through competitive award processes—are a low-cost way to stimulate a significant amount of collaboration, innovation, and new economic activity in the local economic regions that are the ultimate source of national prosperity. For that reason, it’s good to see the map filling up. The nation badly needs to avoid big mistakes slashing federal R&D investments through the sequestration. And it needs to deliver on game-changers like immigration reform while implementing bold experiments like the manufacturing hubs. But it also needs to maintain and extend the broad array of modest partnerships that the map shows are gradually renewing the innovation commons in U.S. industries, region by region, cluster by cluster.

Authors

Mark Muro

Manufacturing Hubs: What and Why?

Mark Muro and Kenan Fikri — Wed, 13 Feb 2013 00:00:00 -0500

Last night President Obama proposed the launch of "a network of manufacturing hubs" through which industry, universities, community colleges, and governments will work together to develop and deploy new manufacturing technologies. That line in the State of the Union address probably had a lot of folks scratching their heads, wondering where it came from. After all, we as a nation have gotten out of the habit of thinking much about manufacturing, how innovation works, and the work of inventing things.

So what is it all about?

As it happens, and as I wrote last summer, Obama’s manufacturing hubs proposal is not a one-off idea out of nowhere but in fact is one very smart and plausible idea that Congress and the nation really should embrace.

Basically, the manufacturing hubs idea reflects an emerging consensus among a large number of industry leaders, technology analysts, and economic development professionals that regions are the place to work on technology-based development and that regions need to be anchored by hubs of collaborative R&D where industry can work with academia and government to solve tough problems and foment technology gains.

Creating such hubs was the idea behind our companion proposals at Brookings for the creation of a network of regional energy discovery-innovation institutes and the establishment of a program to aid and abet nascent clusters with competitive grants. And it is also the point of the Department of Energy’s Energy Innovation Hubs program as well as the several regional innovation cluster programs now running, including at the Department of Commerce’s Economic Development Administration, that have moved along these lines. More recently, my colleague Devashree Saha and I proposed creating a similar network of advanced industries hubs in both energy and manufacturing.

The ultimate point: Industries and the regions in which they are located profit from the presence of structured centers of excellence in which industry led consortia of firms, universities, community colleges, state and local governments, and other actors collaborate to solve innovation and technology deployment challenges of critical interest to advanced industries. That’s the point of innovation hubs.

So it is welcome to see the Obama administration moving to publicize and build out a potential network of regional manufacturing institutes aimed at tackling tough problems in advanced manufacturing.

Piloted last year with the launch of a new public-private institute for “3-D printing” in Youngstown, OH, the proposed new National Network for Manufacturing Innovation would launch 15 innovation centers akin to those boosting national competitiveness in leading innovation and manufacturing nations, such as Germany to Taiwan, as noted by David Hart, Stephen Ezell, and Robert Atkinson of the Information Technology & Innovation Foundation.

The centers will seek to accelerate technology deployment, operate demonstration facilities and test beds, support education and training, and perform applied research on new manufacturing processes—all unlikely activities for private industry on its own.

Nor will they do this just anywhere. Selected and designated through a competitive process, the hub consortiums will reflect not just technical excellence but regional excellence and regional concentrations of expertise and opportunity. In that sense, the theory and practice behind the hubs is compelling and sensible, as I wrote last year with my colleague Jessica Lee, and reflects a critical aspect of innovation and technology development:

Innovation, and its deployment, does not happen just anywhere. It happens in places and, most notably, within metropolitan regions where firms and workers tend to cluster in close geographic proximity, whether to tap local supplier networks, draw on a pool of skilled workers, or profit from formal and informal knowledge transfer.
If properly channeled, these “co-location synergies,” as economist Greg Tassey has dubbed them, will ensure that value added through innovation spreads through and remains within the domestic manufacturing supply chain. Nor is this only a “soft” benefit. Such local synergies—accumulated region by region—can foster greater efficiency within and across manufacturing supply chains and add to the nation’s competitiveness.

In sum, the proposed new manufacturing hub network is far from random, or sudden. In fact, it’s not only smart and necessary for rebuilding U.S. manufacturing competitiveness, it also draws on some of the most fundamental wellsprings of economic exchange known.

Authors

Mark Muro
Kenan Fikri

Image Source: © Ho New / Reuters

Launch! Taking Colorado’s Space Economy to the Next Level

Mark Muro, Devashree Saha, Kenan Fikri, Jessica Lee and Nick Marchio — Tue, 05 Feb 2013 00:00:00 -0500

Part of Brookings's new Advanced Industries Series, this report finds that the Colorado space economy is a critical driver of economic growth and explores how Colorado can defend and extend its current position as one of the most multidimensional space economies in the nation. Directly employing over 66,000 workers across the military, civil, and private domains, the full space enterprise in Colorado contributed some $8.7 billion in value-added output in 2011, in a performance that generated some 3.8 percent of Colorado’s private-sector gross domestic product.

Note: This report was released at an event on Tuesday, February 5, at the History Colorado Center. The Metropolitan Policy Program at Brookings presented a dynamic public forum focused on the significance and future of the Colorado space economy as an exemplary advanced industry. The forum explores ways the Colorado space cluster can build and sustain regional and national economic competitiveness. See event details.

With the Great Recession receding but disruptive change in the air, Colorado has been moving to reassess its economic positioning and identify the most promising sources of long-term growth and competitiveness.

Most notably, the administration of Gov. John Hickenlooper—alert to calls that the United States must reorient its drifting economy away from consumption activities and imports and more toward high-value innovation, production, and exports—has been carrying out a major economic planning initiative aimed at engaging the state’s key industries and regions in a “bottom-up” effort to explore and seize on the best opportunities for economic expansion. Through this Colorado Blueprint process, the state has come to focus—with support from the Brookings Institution Metropolitan Policy Program—on its extraordinary space/aerospace cluster, which it quickly recognized stands as a classic “advanced industry.”

Three major findings about the Colorado space economy:

Colorado possesses one of the most diversified, multidimensional, and high-potential space economies in the nation.
However, while significant opportunities are emerging, a set of disruptive forces at work in the global space market have exposed a number of competitive challenges for the Colorado industry.
Given these challenges as well as its many strengths, Colorado should commit itself to preeminence in the space through a collaborative partnership of industry and government along six dimensions.

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Launch! Taking Colorado’s Space Economy to the Next Level

Tue, 05 Feb 2013 11:00:00 -0500

Event Information

February 5, 2013
11:00 AM - 1:30 PM EST

Auditorium
History Colorado Center
1200 Broadway
Denver, CO 80203

Time: 9:00 - 11:30am MST
Venue: History Colorado Center, Auditorium
1200 Broadway, Denver, Colorado

U.S. “advanced industries”—high-value engineering and R&D-intensive industrial concerns—make signal contributions to national and regional economic prosperity. Iconic American companies such as United Technologies, GE, Intel, Boeing, Lockheed Martin, Ford, Caterpillar, and Medtronic comprise 10 percent of the overall economy but generate 45 percent of U.S. goods exports and support over 4 million high-skill jobs and several million more ancillary ones.

The space and aerospace industry is quintessentially emblematic of the advanced industry sector. And one of the deepest and broadest concentrations of space-related activity in the country lies in Colorado. There, the space cluster pervades the state’s industrial base; cuts across the public and private sectors; and enables a fast-growing telecommunications industry, dynamic GIS and earth observation enterprises, as well as more emergent energy, cybersecurity, and advanced materials segments of the economy.

On Tuesday, February 5, the Metropolitan Policy Program at Brookings presented a dynamic public forum focused on the significance and future of the Colorado space economy as an exemplary advanced industry. Part of Brookings's new Advanced Industries Series, and anchored by the release of a new Brookings strategy report by Mark Muro, senior fellow and policy director of the Brookings Metropolitan Policy Program, the morning forum explored the best ways to advance the competitiveness of the Colorado space cluster at a time of uncertainty and disruptive change.

Hosted in collaboration with the Colorado Space Coalition and the Colorado Office of Economic Development and International Trade, the event also featured comments from leading business, civic, and government leaders as well as a panel discussion and audience Q & A. Colorado Governor John Hickenlooper concluded the event with keynote remarks.

Read the report, which was released at this event.
See also Mark Muro's presentation » (PDF)

Panel Discussion (L to R): Tom Clark, Chief Executive Officer, Metro Denver Economic Development Corporation; Frederick Doyle, Vice President and Corporate Executive, Defense and Intelligence Community, Ball Aerospace & Technologies Corporation; Walter Scott, Founder, Executive Vice President, and Chief Technical Officer, DigitalGlobe, Inc.; Stein Sture, Vice Chancellor for Research, Huber and Helen Croft Endowed Professor, College of Engineering and Applied Science, University of Colorado at Boulder; Dan Schmitt, Co-Founder, President, Chief Executive Officer, The Incubation Factory

Mark Muro, Senior Fellow and Policy Director, Metropolitan Policy Program at Brookings

Governor John Hickenlooper, State of Colorado

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Full Event - Launch! Taking Colorado’s Space Economy to the Next Level

Launch! Taking Colorado’s Space Economy to the Next Level

Tue, 05 Feb 2013 11:00:00 -0500

Event Information

February 5, 2013
11:00 AM - 1:30 PM EST

Auditorium
History Colorado Center
1200 Broadway
Denver, CO 80203

Time: 9:00 - 11:30am MST
Venue: History Colorado Center, Auditorium
1200 Broadway, Denver, Colorado

U.S. “advanced industries”—high-value engineering and R&D-intensive industrial concerns—make signal contributions to national and regional economic prosperity. Iconic American companies such as United Technologies, GE, Intel, Boeing, Lockheed Martin, Ford, Caterpillar, and Medtronic comprise 10 percent of the overall economy but generate 45 percent of U.S. goods exports and support over 4 million high-skill jobs and several million more ancillary ones.

The space and aerospace industry is quintessentially emblematic of the advanced industry sector. And one of the deepest and broadest concentrations of space-related activity in the country lies in Colorado. There, the space cluster pervades the state’s industrial base; cuts across the public and private sectors; and enables a fast-growing telecommunications industry, dynamic GIS and earth observation enterprises, as well as more emergent energy, cybersecurity, and advanced materials segments of the economy.

On Tuesday, February 5, the Metropolitan Policy Program at Brookings presented a dynamic public forum focused on the significance and future of the Colorado space economy as an exemplary advanced industry. Anchored by the release of a new Brookings strategy report by Mark Muro, senior fellow and policy director of the Brookings Metropolitan Policy Program, the morning forum explored the best ways to advance the competitiveness of the Colorado space cluster at a time of uncertainty and disruptive change.

Hosted in collaboration with the Colorado Space Coalition and the Colorado Office of Economic Development and International Trade, the event also featured comments from leading business, civic, and government leaders as well as a panel discussion and audience Q & A. Colorado Governor John Hickenlooper concluded the event with keynote remarks.

A report was released at this event.

Video

Full Event - Launch! Taking Colorado’s Space Economy to the Next Level

Advancing Advanced Industries

Mark Muro — Tue, 05 Feb 2013 00:00:00 -0500

Pristine clean rooms, gleaming components, jaw-dropping technical exploits: America’s advanced industries (AI) sector is the focus in Denver today as the Brookings Metropolitan Policy Program delivers a new competitiveness strategy for the Colorado space industry at a dynamic forum with Gov. John Hickenlooper.

Our key point: Engineering- and R&D-intensive advanced industries like the Colorado space cluster are prime movers of U.S. prosperity and merit special attention as regions, states, and the nation seek to reignite growth through innovation after the Great Recession.

Building on insights provided by colleagues at the McKinsey & Company Advanced Industries Practice, we at Brookings see a critical need for states and regions to focus on their advanced industries, which have enabled a steady stream of life-transforming innovations ranging from spaceflight to LASIK, MRIs to clean energy. These high-value industries are crucial drivers of local and national innovation, productivity, and exports—generating 10 percent of the nation’s output, 46 percent of U.S. goods exported, and over 8 million skilled jobs.

In Colorado today we’ll unveil work we undertook in conjunction with Hickenlooper’s Colorado Blueprint process. Our report drills down on one particularly significant AI and the decisive moves that will be needed to maintain and extend it.

Brookings’ fine-grained, establishment-level analysis brings Colorado’s space cluster into focus as a true “crown jewel” advanced industry that pervades and enables the state’s broader economy. When it comes to innovation, the state’s space economy is literally extending the envelope of human capacity and making life better. Take satellites: Colorado companies are building and operating the satellites that deliver real-time GPS signals, weather data, television broadcasts, and mobile communications to billions across the globe. Colorado’s DigitalGlobe, for example, provides millions of square kilometers of the high-resolution satellite imagery that make Google Earth and Google Maps possible.

How does all this translate into economic value? Hugely: As depicted in our analysis, the Colorado space industry contributes inordinately to Colorado’s, and the nation’s, economic well-being. Just in terms of its top-line numbers, the cluster now encompasses more than 500 private establishments that directly employ over 66,000 workers across the military, civil, and private sectors. This $16 billion economy has been a steady contributor to high-pay job growth in Colorado, even through the Great Recession. In short, Colorado’s space economy exemplifies the kind of high-value AIs that the nation and its regions must defend and expand as they seek to refocus the nation’s drifting economy on higher-value traded-sector growth.

However, maintaining the nation’s AI prowess will require increased focus and collaborative action in the years ahead. Disruptive forces at work in the global marketplace now require industry and government to work together to master change and innovate.

In view of that, our report challenges the state of Colorado to “become the center of innovation for the global space economy.” By consolidating the state’s current position in the space economy, seizing new opportunities as they emerge, committing to innovation, improving access to risk capital, bolstering the workforce pipeline, and intensifying cluster dynamics, industry and state government will need to work together to make Colorado’s space economy one of the foremost AI clusters in the nation—and the world.

AIs matter vitally, and to defend and expand them, regions and states need to act in concert—and Washington needs to help them.

Authors

Mark Muro

Patenting Prosperity: Invention and Economic Performance in the United States and its Metropolitan Areas

Jonathan Rothwell, José Lobo, Deborah Strumsky and Mark Muro — Fri, 01 Feb 2013 00:00:00 -0500

“Patenting Prosperity: Invention and Economic Performance in the United States and its Metropolitan Areas” is the first analysis of its kind to present patenting trends on a regional level from 1980 to 2012. The report ranks all of the nation’s roughly 360 metropolitan areas on patenting levels and growth, while noting the firms and organizations responsible. It also analyzes how patenting has affected productivity levels in each region, comparing patents—which embody novel inventions—to other sources of economic dynamism, such as educational attainment.

This report examines the importance of patents as a measure of invention to economic growth and explores why some areas are more inventive than others. Why should we expect there to be a relationship between patenting and urban economic development? As economist Paul Romer has written, the defining nature of ideas, in contrast to other economic goods, is that they are non-rival: their use by any one individual does not preclude others from using them. Although useful ideas can be freely transmitted and copied, the patent system guarantees, in principle, temporary protection from would-be competitors in the marketplace (i.e. excludability). Thus, one would expect regions to realize at least some of the value of invention, as has been shown for individual inventors and companies that patent. Yet there is no guarantee that patents generated in a specific location will generate wealth in that same location—a set of conditions (the presence of a skilled and diverse labor force, an “ecosystem” of businesses providing complementary goods and services, financing and marketing capabilities among them) have to be met for invention to be commercialized. Research has established that patents are correlated with economic growth across and within the same country over time. Yet, metropolitan areas play a uniquely important role in patenting, and the study of metropolitan areas within a single large country—the United States—allows one to isolate the role of patents from other potentially confounding factors like population size, industry concentration, and workforce characteristics.

An analysis of national and metropolitan area invention from 1980 to 2012, using a new comprehensive database of patents, reveals:

The rate of patenting in the United States has been increasing in recent decades and stands at historically high levels.
Most U.S. patents—63 percent—are developed by people living in just 20 metro areas, which are home to 34 percent of the U.S. population.
Inventions, embodied in patents, are a major driver of long-term regional economic performance, especially if the patents are of higher quality.
Research universities, a scientifically-educated workforce, and collaboration play an important role in driving metropolitan innovation.
Patents funded by the U.S. government tend to be of especially high quality, and federal small business R&D funding is associated with significantly higher metropolitan productivity growth.

Read the report »
View the interactive feature »

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Authors

Jonathan Rothwell
José Lobo
Deborah Strumsky
Mark Muro

Washington Must Focus on Growth

Bruce Katz and Mark Muro — Wed, 23 Jan 2013 00:00:00 -0500

Editor's Note: Bruce Katz and Mark Muro call on the federal government to strengthen the manufacturing sector by suggesting low-cost initiatives to bolster U.S. economic competitiveness. Katz and Muro highlight recent recommendations to create a ‘"Race to the Shop Competition," designate "U.S. Manufacturing Universities," and authorize a national network for 25 advanced industries innovation hubs. Read the full article at cnn.com.

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Bruce Katz: This Could Be a Manufacturing Moment

"Reviving America’s advanced industries is a critical component of building a more productive, sustainable, and inclusive economy. U.S. manufacturing, for instance, provides an important source of quality jobs that pay, on average, nearly 20 percent higher weekly earnings than non-manufacturing jobs, and are more likely to provide employee benefits."

Debt and deficits have dominated our nation’s capital for the last two years. From the near government shutdown over a budget impasse in April 2011 to the debt ceiling crisis and subsequent credit downgrade in August 2011 to the recent brinksmanship to avert a fiscal cliff, it has been “all deficits all the time.

And yet, amidst the fiscal obsession, a slow-moving economic emergency persists. The U.S. faces an overall “jobs deficit” of 11 million to make up the jobs we lost during the Great Recession and account for a wave of new entrants to the labor force. The number of poor and near poor in America skyrocketed from 81 million in 2000 to 107 million in 2011, nearly one-third of the U.S. population.

Given these trends, it is not enough for the federal government to simply get its fiscal house in order. Rather, it’s time for both sides to put aside deep ideological differences and work together to jumpstart economic growth.

Where should they begin? An obvious first step is to invest in growing the productive and innovative “advanced industry” sectors of our economy, such as advanced manufacturing.

Bruce Katz: This Could Be a Manufacturing Moment

Authors

Publication: Global Public Square, CNN