MIT Report: U.S. Manufacturing Hits a Wall When It’s Time to Scale

Manufacturing isn’t dead in the U.S. But when it comes time to pump out products on a large scale, the pull of overseas economies and investors becomes too strong to resist.

That’s one of the conclusions from a group of MIT researchers tackling a wide-ranging study of the American production economy.

Their report aims to give a broad picture of the current state of manufacturing in the U.S., with an emphasis of how “production” industries ranging from heavy industry to biotech can compete in an era increasingly focused on intellectual heft and engineering prowess.

For one aspect of the study, which is called “Production in the Innovation Economy,” researchers looked at how non-software companies licensing technology from MIT fared in the wild from 1997 to 2008.

Those 150 companies represented a diverse range of sectors, including advanced materials and energy, biopharma, medical devices, robotics, semiconductors, and electronics. And for many of them, MIT officials found a pretty clear chasm when it came time to reach large-scale production.

Here’s how the rough timeline broke down: MIT says that “on the whole,” the 150 production companies it studied were able to get financing that bankrolled their early growth in the U.S.—sometimes for up to 10 years.

“But many of them, when they came to the stage of moving to full-scale commercialization, could not find finance in the U.S.,” the report says. “As many of them made the transition from venture funding to high-volume manufacturing, they eventually had to look for foreign investors and often moved abroad to manufacture their products.”

That’s just a preview of the findings from MIT’s big study, which is expected to publish its final results in a pair of books later this year. It’ll be interesting to track the research as more detail emerges, to see just how significant the exodus was for those companies being tracked.

It’s certainly a topic that many people are interested in lately. With January’s U.S. unemployment tally still above 12 million in the aftermath of the Great Recession, politicians, some businesses, and labor leaders are keen on making sure the U.S. has some form of manufacturing sector to call its own.

President Barack Obama is chief among those emphasizing domestic manufacturing jobs—from a legendary dinner roundtable with the late Apple CEO Steve Jobs (“Those jobs aren’t coming back”) to his recently outlined plan for $6 billion in manufacturing tax credits.

The U.S. is still the world’s largest manufacturing economy, albeit with China close behind, according to figures from the National Association of Manufacturers. And some very serious manufacturing work—hello, Boeing 787—is clearly better off being done at home.

But high-tech gadgets produced at huge volumes (the kind of things that made Apple one of the world’s most valuable companies) are run almost exclusively through overseas economies. And even tiny startups backed by crowdfunding are turning to premium factories in China to get their orders churned out—and let’s not forget overseas drug development.

If there’s a cure to be found, you could do worse than having 20-some MIT minds hacking away at a solution.

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