Globalization, increased competition and the recent recession have forced changes in U.S. industry and government research funding and strategies that do not bode well for a strong U.S. manufacturing future. The situation hasn't yet reached crisis proportions, but it demands attention from executives and public policy leaders now. Here are the issues we need to address:
Funding Decline: The percentage of R&D investment in manufacturing has slowly but steadily declined since the late 1980s, even as total R&D investment has grown, says Manufacturers Alliance/MAPI, a Washington, D.C.-based public policy group. The drop in funding comes at a time when other countries are sustaining and growing R&D investment, says Manufacturers Alliance.
Countries as "Products": If the U.S. doesn't provide support for R&D, other countries will. Like it or not, countries are not passive overseers of a free market. They have become a product -- nearly a commodity -- in the marketplace. As a result public policy plays a big role in attracting industrial investment. Where the U.S. once enjoyed the dominance that allowed it to control industry's research agenda, now it must compete with a growing number of countries to be the home of the most lucrative wealth-generating industries.
The Valley of Death: A healthy symbiotic relationship -- with government focusing on basic science and industry delivering innovative products -- has served the U.S. manufacturing industry well over the years. Now, however, intense competition has forced companies to direct their attention closer to the end market, leaving a funding gap -- the valley of death -- between technology prototypes derived from government-funded basic research and the end-stage product developed by industry. Even venture capital has shifted its attention toward companies with current sales in near-term markets. Failure by government and industry to find a way to fund this crucial step will cause the next decade's new product pipeline to run dry.
Investment Choices: In the last few years, the federal government has shifted dollars from the physical sciences to the life sciences to jump-start the nascent biotechnology industries, and that wasn't all bad. Indeed, emerging life-science industries represent a new, fast-growing branch of the manufacturing sector as new drugs and biomedical devices take their place alongside automobiles and semiconductors. Now, however, the imbalance needs to be addressed by increasing funding to the physical sciences. After all, these new life-science industries are dependent upon manufacturing technology to profitably churn out products.
Knowledge Economy: In the past the education of scientists and engineers has been a major part of U.S. industrial leadership that's been strongly supported by the government. Now, however, the nation is graduating fewer scientists and engineers. Further, increasing numbers of U.S. graduates in the sciences are from overseas, and many return to their home countries upon graduation. We shouldn't stop educating foreign students, but we should start using the federal government's bully pulpit and funding to encourage U.S. citizens to pursue physical-science degrees.
The very strength of this nation over the decades can be attributed to its ability to counter economic and military threats with strong industry and government leadership in advanced technology. Today, the U.S. faces just such a challenge to its research and technology leadership. The way we respond will determine whether U.S. manufacturers will be able to compete in the future.
Patricia Panchak is IW's editor-in-chief. She is based in Cleveland.