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Cultivating the manufacturing industry means cultivating innovation

Manufacturing is still important, increasingly important. In the age of computer technology and immateriality, of finance and spreads, the manufacturing industry is still an area that exists and must exist. The problem is having the capacity for maintaining it and making it grow.

These are the arguments of Gary P. Pisano and Willy C. Shih (economists and both lecturers at Harvard Business School), in their “Producing Prosperity: Why America Needs a Manufacturing Renaissance”.

Pisano and Shih, however, do not just pay tribute to industrial savoir-faire, to the concrete nature of real production as opposed to finance. The two scholars go further, explaining that modern companies still have, like before, commons, although they are immensely more complex compared to the past. These are for example technological know-how, managerial capacity, specialist abilities rooted in the work force, competitors, suppliers, customers, cooperatives, research and development and universities. All this flows between companies and links them up, creating a territorial manufacturing network which becomes essential for growth and innovation. A situation which takes its moves from the local arena to become global and to become local again. All this in a virtuous circle which, according to the two researchers, cannot and must not be put down but which instead has to be sustained and nourished with managerial skills and political foresight.

In order to explain this better Pisano and Shih adopt, among other things, an example: when in the 1980s the production of semiconductors moved to Asia, it took with it myriad skills, processes of production of electronic material, capacity for assembly and sophisticated tests which created industrial commons in turn necessary in order to produce an entire range of advanced electronic products with high added value. A single company did not relocate but a community of companies moved which changed the life of entire areas. Exactly like, in another example given by the two authors, the case of state-owned pastures, once very common, which supported and fed rural and small farm economies up to relatively recent times. Once they had been cancelled out (equivalent to today’s industrial commons), an entire economic set-up was swept away.

The two Harvard economists reach three conclusions: when a country loses its manufacturing capacity, it also loses the ability to innovate, industrial commons are therefore a sort of platform for growth and, finally, the erosion of this is not at all natural and inevitable.

Why America Needs a Manufacturing Renaissance

Gary P. Pisano – Willy C. Shih

Harvard Business School – Working Knowledge

October 2012