The Manufacturing USA Initiative was originally established as the National Network for Manufacturing Innovation (NNMI) program. Begun in 2012 and established with bipartisan support in the Revitalize American Manufacturing and Innovation Act of 2014 (RAMI Act, 2014), the initiative has created a network of research and development centers for different manufacturing technologies. As indicated on the Manufacturing USA website, the initiative “brings together industry, academia and federal partners within a growing network of advanced manufacturing institutes to increase U.S. manufacturing competitiveness and promote a robust and sustainable national manufacturing R&D infrastructure” (National Institute of Standards and Technology [NIST], 2019). Some 14 manufacturing innovation institutes have been established to facilitate the movement of early-stage research into proven capabilities ready for adoption by U.S. manufacturers (see Box 1-1).
The Manufacturing USA network is coordinated by the interagency Advanced Manufacturing National Program Office, which is located at the National Institute of Standards and Technology (NIST). The individual institutes are structured as public-private partnerships funded in part through multi-year cooperative agreements between a sponsoring federal agency and a nonfederal entity in charge of operations. The Departments of Commerce, Defense, and Energy serve as lead funding agencies for the institutes through their separate appropriations. According to Manufacturing USA’s latest annual report, total institute expenditures for FY 2017 were $298.5 million. Of this, non-program matching expenditures totaled $177.8 million and federal program funds totaled $120.7 million (NIST, 2018). The RAMI Act requires that federal funding be provided for a limited period of time, with an initial minimum one-to-one cost share from other sources, and federal funding of the institutes decreasing over time. (RAMI Act, 2014).
Each institute within the network is an applied research center that provides “a venue where industry, academia, and government partners conduct research and development on applied manufacturing technologies of a focused nature (see Figure 1-1). The benefits of this research accrue to the institute members, participants in related supply chains, and in the long run, to the nation as a whole” (NASEM, 2017b). The institutes had 1,291 members in FY 2017,1 among which were “844 manufacturing firms, 297 educational institutions (universities, community colleges, and other academic institutions), and 150 other entities, including federal, state, and local government, federal laboratories, and not-for-profit organizations” (NIST, 2018). Sixty-five percent of the member manufacturers were small businesses with 500 or fewer employees.
To better understand the role and experiences of the Manufacturing USA institutes, a planning committee under the auspices of the Innovation Policy Forum convened an initial workshop, entitled “Securing Advanced Manufacturing in the United States: The Role of Manufacturing USA” in May 2017. The presentations and discussions at this workshop addressed the policy role and need for the advanced manufacturing institutes, examined selected foreign programs design to support advanced manufacturing, and reviewed recent
1 The figure for FY 2016 was 830 members. Two of the newer institutes began accepting members in the first quarter of FY 2018.
assessments of existing institutes. Presenters and participants also shared lessons learned, improvements, and additional tasks that could be considered and adopted in the future by the institutes. The proceedings from this workshop (NASEM, 2017b),2 identified three key themes arising from the discussion:
- “Importance of public-private partnerships in advanced manufacturing—Various speakers described the relationship between a robust manufacturing sector and national security, job creation, and economic growth. They also described the results of past disinvestments in domestic manufacturing and explained how market failures may impede progress in U.S.-based advanced manufacturing.
- “Role of the Manufacturing USA institutes—Multiple presenters emphasized the role of the manufacturing institutes in connecting university research to manufacturers, drawing new manufacturing technologies and techniques into small and large firms, fostering regional innovation ecosystems, and developing the skilled technical workforce.
- “Lessons from foreign programs—A number of workshop participants drew comparisons and contrasts with the nature and scale of efforts in China and Germany to accelerate the development and adoption of advanced manufacturing techniques” (p. 6).
Given the continued prominence of enhancing domestic manufacturing and international competitiveness in public policy discussions, the Innovation Policy Forum convened a second workshop on November 14, 2018, to monitor the progress of the Manufacturing USA institutes. That workshop, entitled “Revisiting the Manufacturing USA Institutes,” is the focus of this proceedings. The workshop’s goal was to “explore how effective the Manufacturing USA institutes have been at creating partnerships among industry, academia, and government; facilitating collaboration and co-investment to nurture manufacturing innovation; accelerating commercialization; and fostering a skilled manufacturing workforce” (see Statement of Task, Box 1-2).
The workshop planning committee3 organized a series of panels4 focused on three particular market failures: a decline in U.S. manufacturing capability and competitiveness, a gap in the skills needed for advanced manufacturing, and the difficulty in bringing advances in manufacturing technology to small and medium-sized enterprises. Presentations and discussions at the workshop examined the role of the Manufacturing USA institutes in these three theme areas: maintaining U.S. competitiveness, creating a skilled workforce, and building robust supply chains. In addition, a number of speakers addressed concerns about the sustainability of the Manufacturing USA institutes.
In his opening keynote address, Patrick Gallagher, chancellor of the University of Pittsburgh, provided an overview of all three workshop themes. He argued that the manufacturing sector has “always had a special place” in the American economy and that it matters because of its centrality to American competitiveness, its dominance of the tradeable economy, and its dominance in private-sector research and development (R&D). Historically, it has had a special role in providing Americans access to the middle class, and it provided a pathway for employment for people coming out of an agrarian society. Manufacturing is also intertwined with national security, especially in the procurement domain with its focus on place of origin and assembly.
During World War II and the decades following, U.S. innovation capability was built around public-private partnerships with the goal of promoting national security. Companies were mobilized during the war effort, notably with the Manhattan Project and the production of the atomic bomb. Postwar-era policy makers envisioned a very important role for industry in partnership with the federal government. However, with the end of the Cold War, the national security-driven innovation model had to give way to an “economically centric” one. Companies’ R&D spending increased at faster rates than federal R&D spending, and a bifurcation of R&D emerged whereby the federal government’s work was largely in basic science, while the private sector moved closer to product development. Organizations with large R&D labs closed or dramatically downsized, moving more toward the production of products using existing
technologies rather than the development of new ones. This segregation in R&D activity was detrimental to the nation’s long-term economic performance because it hurt its innovation capability. One of the key drivers of the manufacturing institutes, then, was to address this problem.
Retaining U.S. Competitiveness
Dr. Gallagher highlighted past responses to threats to U.S. competitiveness. When the United States faced dramatic, global competition in the late 1980s in manufacturing from countries like Japan, and considered for the first time in its history the loss of its manufacturing preeminence in the world, the federal government enacted a series of policy responses to spur U.S. competitiveness. This included the broadening of the mission of the National Institute of Standards and Technology (NIST) to look at U.S. industrial competitiveness, passing legislation to help spur universities to transfer technologies outside of the lab, and adopting policies to increase quality standards.
Efforts to spur innovation in the manufacturing sector, enhance U.S. competitiveness, and promote quality took on new meaning after the Great Recession. While the immediate focus was on job creation and shoring up domestic manufacturing in sectors such as the automobile industry, questions arose about why U.S. manufacturers had lost their competitive position and how to create a more receptive policy environment where manufacturing issues could be considered more broadly. Once the recovery was on its way, policy makers shifted focus to sustaining a robust, long-lasting recovery, which included forming the advanced manufacturing institutes.
To avoid the fate of the Advanced Technology Program, which was designed to be a civilian program along the lines of the Defense Advanced Research Projects Agency (DARPA) but lost political support and was terminated, the Manufacturing USA institutes were designed to try to move industry closer to the type of research the public sector was supporting. This would be facilitated by forming consortia, each with a lab near universities or national laboratories where public-sector research is done. As Dr. Gallagher noted, “We were trying to shift the amount of private sector funds, pull it towards the basic research side, and then try to increase the amount of shoulder rubbing between the universities and this corporate R&D activity.”
Creating a Skilled Workforce
Although it was a secondary consideration in the beginning, education and workforce development is now a critical component of the Manufacturing USA institutes, particularly regarding small and medium-sized enterprises (SMEs), which make up 90 percent of the U.S. manufacturing workforce. Dr. Gallagher commented that if SMEs do not put new technology into their plants (which would obviate any incentive to “up-skill” the labor force through training
and development), the cycle of low productivity and low wage growth for SMEs relative to larger firms will continue. Prioritizing workforce skills and nurturing innovation and engineering talent are key to protecting the future of U.S. manufacturing, particularly in light of strategic competition with China, where a co-location strategy—that is, one focused on leveraging manufacturing and design capabilities in the same geographic location—prevails.
Dr. Gallagher explained that the institutes leverage manufacturing to create an innovation capability. This emphasis on science, R&D, and engineering know-how stands in contrast to the concerns of the procurement system, which currently is focused on where goods are made and location of final assembly. If the predominant strategic question of the institutes is where to locate the innovation, science, and R&D behind advanced manufacturing, then production activities will emerge because of this co-location synergy.
Building Robust Supply Chains
The current supply chain policy, Dr. Gallagher reiterated, is driven by procurement from agencies like the Department of Defense and focuses on location of final assembly of a good at the expense of location of the innovation to produce that good. Supply chains based on and driven by foreign engineering and innovation obviate any security benefit realized from domestic manufacturing, especially if that engineering and innovation capacity was ultimately absent from the United States. Supply chains and supply chain policies that integrate innovation and co-location of R&D, engineering, and production would better address gaps in domestic innovation capacity. A way to accomplish this, he said, would see the institutes as anchors for place-based economic activities that incentivize companies to consider co-locations of production and R&D.
Dr. Gallagher discussed how, in addition to figuring out how to bring more SMEs into the Manufacturing USA institutes’ consortia of firms (as they are crowded out by larger, more productive firms), the institutes need to address stagnation in productivity and wage growth that afflict SMEs. Recent positive trends in several indicators of the manufacturing sector, such as productivity growth and return on capital, have been seen only for the largest companies and not for the SMEs that make up the rest of the supply chain and employ 90 percent of the manufacturing workforce. A challenge for the institutes is figuring out, then, how to drive new technology and production capability into SMEs and incorporate them further in the innovation ecosystem around the institutes.
In conclusion, Dr. Gallagher noted that the report card on the Manufacturing USA institutes is incomplete, though trending positively. The institutes have formed excellent consortia and the participation level is strong. However, because the Manufacturing USA program is not anywhere near scale, the path forward for the innovative capability of U.S. industrial sector is uncertain.
The remainder of this proceedings volume is divided into a series of chapters. The next three chapters present thematic summaries of the workshop discussions—with Chapter 2 covering increasing U.S. competitiveness by improving knowledge creation and technology diffusion; Chapter 3 covering workforce development; and Chapter 4 covering support for supply chains and SMEs. Chapter 5 gives a brief summary of discussions concerning the sustainability and future of the institutes, and Chapter 6 presents selected key points made by presenters at the workshop. These chapters are followed by a list of References that appear in the volume and a series of appendixes. Appendix A reproduces the workshop agenda, Appendix B presents a glossary of abbreviations, and Appendix C includes biographies of workshop speakers and members of the planning committee.