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The question for the future, however, is whether modularity and the separation of innovative activities from manufacturing will characterize the great new industries of the next decades, as they have characterized the IT industry of the recent past. Research being conducted by the MIT Production in the Innovation Economy Commission on companies in wind and solar, biotech, new materials, batteries, and other emerging technology sectors suggests a number of reasons to question whether the IT paradigm will be workable for them. It’s yet too early to draw any firm conclusions from this research, but already it appears that the challenges in scaling up these activities from laboratories through startups into full production of new products and services are different from the issues that software or electronics companies face in their transition from product idea to market. One obvious difference is that scaling up requires much more capital in these new industries than it does in software. But equally critical, in today’s emerging technology sectors R&D, design, and production appear to be harder to separate than they are in the IT industry. Indeed, much of the most promising R&D and innovation in solar power involves cheaper and more efficient ways of manufacturing photovoltaics, a relatively mature technology. Companies such as Suntech have become major players in solar power by leveraging advanced manufacturing technologies, while others, such as the startup 1366 Technologies, are developing new ways of making solar cells that could dramatically redefine the costs of the technology. In both cases, the innovation is in the manufacturing.

There is a close connection between R&D and manufacturing in many of the emerging sectors because modularization may just not work as well for these technologies as it has for IT. R&D engineers may have to stay close to manufacturing to develop new strategies for making processes more efficient. The tighter integration of innovation and production may also present opportunities to bring design closer to end users, as advanced manufacturing technologies make it possible to produce higher-value goods at lower volume.

If firms need to keep production closely connected to their front-end innovative activities in order to bring new products and processes to the market, it is that something we can do in the United States? The advances we see emerging in areas like energy, life sciences, transportation, environment, communication, construction, and security promise to transform our economy and society. But it may well be that only those countries that can build powerful links between laboratory research and new manufacturing will be able to derive full benefit from their innovative capabilities. New manufacturing may not mean a larger manufacturing sector with large numbers of added jobs, but it certainly would mean radical change in the technologies and business models we have now.

The case for optimism about a renewal of American production capabilities has two legs. First, the strong performance of manufacturing in some other advanced industrial countries suggests that manufacturing and blue-collar work are not doomed in high-wage environments. In Germany, where wages and social benefits for manufacturing jobs are higher than they are in the United States, the fraction of the workforce employed in manufacturing is about twice as high as it is here. Germany has a manufacturing trade surplus—even in its trade with China. New manufacturing is possible in countries with educated populations and high living standards. But realizing such possibilities in the United States will take a major transformation of aging industrial structures that are often less efficient than the large new plants and industrial complexes of Asia.

The second leg of the case for optimism is that radically new manufacturing technologies do appear to be within reach. The demand for new, cleaner energy sources, to name just one example, promises huge markets for technologies that can be manufactured cheaply enough to compete with fossil fuels. Some have called it a new industrial revolution that will have an impact comparable to that of the factory, new power sources, and new technologies in the 19th century. In addition to three-dimensional (additive) printing, there are strong new possibilities in biofabrication and nanomaterials. But for these ideas to be translated into advanced manufacturing and robust industries, we will require new policies—built on an understanding of why manufacturing really matters.

Suzanne Berger is a professor of political science at MIT who has studied politics and globalization. She cochairs the Institute’s Production in the Innovation Economy project.

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Credit: Roy Ritchie

Tagged: Business

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