Industry Market Trends

Key Policies to Boost Manufacturing: Build Advanced Industry Hubs

Jan 31, 2013

Providing support for the factory sector is a crucial strategy for renewing the U.S. economy. In the first part of a series on boosting American manufacturing, the Brookings Institution recommends the creation of a national network of advanced industries innovation hubs.

Apart from recent gains in the housing and construction markets, the U.S. continues to struggle with stagnant economic conditions and limited prospects for its domestic workforce. By focusing on the manufacturing sector, which drives high-tech innovation, exports, and the creation of well-paying jobs, policymakers can help kick start a powerful engine of national growth.

In the first of a series of key policy recommendations to aid the U.S. economy, the non-partisan Brookings Institution calls for the establishment of a national network of advanced industries (AI) innovation hubs that will bolster the competitiveness of the U.S. manufacturing and advanced industries sector.

According to a recent paper from Brookings, advanced manufacturing is engineering-intensive and relies on dynamic research and development, delivering products and services to industries ranging from aerospace and automotive, to energy, IT, and medical devices. Advanced industries account for more than 10 percent of the U.S. economy, generate 45 percent of goods exports, and support over 4 million high-skilled jobs, as well as millions of secondary jobs.

New technologies and processes developed by this sector tend to have a ripple effect across the broader economy, increasing overall productivity and improving the competitiveness of the country's key trade sectors. However, there are numerous challenges facing America's advanced industries.

Under current conditions, private firms lack the incentive to invest sufficient funding in early-stage research or new technologies, which often have enormous up-front costs. Federal investment in industrial research has been low and inconsistent for the past two decades, growing at a far slower pace than the overall economy, while other countries continue to invest a higher share of their GDP in R&D, eroding the competitive advantage of U.S. companies.

In addition, much of federal R&D funding has been channeled into academic settings or national labs, which are typically detached from the private sector and real market conditions.

As a potential solution to these problems, Brookings proposes that Congress authorize the creation of a nationwide network of advanced industry innovation hubs by funding at least five energy innovation centers and financing 20 institutes for advanced manufacturing. The expansion would be modeled after the National Network for Manufacturing Innovation (NNMI) laid out by President Obama in the 2012 State of the Union address, and similar to the National Additive Manufacturing Innovation Institute (NAMII) based in Youngstown, Ohio.

"Concentrating innovation resources into a network of purpose-designed, collaboration-based regional applied research centers focused on industry-relevant product and process issues holds out great promise for accelerating technology advances and subsequent market-share growth in crucial U.S. industries," the study's authors explain. "Such centers will tackle the toughest problems with the biggest commercial pay-offs in technology and process development, technology deployment, and platform establishment. Because they will be regional and intensely collaborative, with strong private-sector participation, the hubs will produce substantial economic spillovers into the regional advanced industry clusters amid which they will be sited."

To ensure these hubs maintain a high level of collaboration and commercial relevance, federal funding would be based on competitive solicitation, with each innovation hub having to establish partnerships and co-investment plans with private businesses, as well as state governments.

"Possible themes for the new hubs could include carbon capture and storage, solar photovoltaics, and smart grid on the energy side and advanced materials, nanomanufacturing, and industrial robotics on the advanced manufacturing and engineering side," the proposal notes.

The Brookings Institute claims there will be six key benefits to establishing these 25 advanced manufacturing innovation hubs:

  • It would signify that the U.S. is committed to investing in game-changing breakthroughs and cultivating an innovative business climate;
  • It would accelerate the pace of applied research in advanced industries;
  • A collaborative network would drive down the cost of advanced industries technologies and accelerate their deployment;
  • Related skills and training would contribute to workforce development at all levels;
  • It would generate new, good-paying jobs and industries and aid the nation's recovery through employment multiplier effects; and
  • The system would boost exports and help U.S. manufacturers compete effectively in global markets, ensuring a strong national economy.

The study estimates that each regional hub would require $25 million in annual funding for at least five years before moving toward self-sufficiency, for a total cost of $625 million over a five-year period. While the cost may seem substantial, the potential benefits of such a network to the U.S. economy would far outweigh the initial expense.

"In short, it's time for Washington to return its attention to the economic emergency and commit itself to working on a bipartisan basis to jumpstart growth," the Institute argues. "Where should it start? One obvious place for a new push to renew the economy is the manufacturing sector-that most critical site of high-tech innovation, exports, and well-paying jobs..."