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March 12, 2013
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Investments in Innovation Can Fuel Region’s Manufacturing Rebound

Manufacturing accounts for a disproportionate component of the nation's innovative activity: While it makes up only 11 percent of GDP, 90 percent of all the nation's patents relate to manufacturing. In Illinois the link between manufacturing and innovation is even more pronounced. Nationwide 68 percent of all private research and development (R&D) spending comes from manufacturing firms; in Illinois this number rises to 87 percent.

Historically metropolitan Chicago has been a leader in manufacturing innovations, revolutionizing fields such as telecommunications (Motorola made the first walkie-talkie) and pharmaceuticals (Abbott Labs was the first to mass produce penicillin). Recently, however, metropolitan Chicago has fallen behind other regions in manufacturing R&D, slipping from the nation's second to eighth largest private R&D center between the years 2000 and 2010. During this same period, the region's manufacturing patents also have not kept pace with competing metro areas.

Though the factors contributing to the region's decline in innovation indicators remain difficult to isolate, some likely causes include the link between production and R&D, and the region's response to new technologies. To the first point, the region lost about a third of its manufacturing production positions in the period 2000-2010, the same period in which it witnessed the sharp decline in R&D, suggesting strong interrelations between the region's R&D capabilities and local manufacturing production. As such, many of the region's R&D positions likely followed production abroad to take advantage of faster turnarounds and closer connections between product engineers and developers. For example, an estimated 90 percent of all research in electronics—once a specialization of metropolitan Chicago—now occurs in Asia in close proximity to concentrated production facilities. And to the second point, metropolitan Chicago perhaps has not been as nimble as other domestic regions such as Boston or San Diego in replacing lost R&D with expertise in new technologies.

CMAP's manufacturing cluster drill-down report shows how rising international costs coupled with supply chain vulnerabilities are leading more manufacturers to reinvest in the U.S. Indeed, metropolitan Chicago has added between 15,000 and 25,000 manufacturing cluster jobs in the last two years. Yet the region's relative decline in R&D support threatens to stifle this recent manufacturing momentum. To thrive in the new century of global manufacturing, the region needs to build on the types of advanced manufacturing that complement regional strengths. CMAP's Advanced Manufacturing Scorecard shows how innovation is a vital characteristic of this type of manufacturing.

Ways to Reestablish the Region as Manufacturing Innovation Center

To address the region's drop in innovation indicators, metropolitan Chicago can draw on its existing public R&D assets to increase technology transfer. Few regions can rival our combination of world-class research universities and national labs, yet more work can be done commercializing the results of that research. Granting private firms a collaborative role in advancing basic research will not only help ensure practical industry application but also provide a clearer path to commercialization. Some of the region's most promising technologies -- with clear commercial applications across many industries from machinery to pharmaceuticals to fabricated metals -- include nanotechnology, supercomputing, and material science.

Connecting smaller manufacturing firms to the region's innovation system can also help rebuild the cluster's R&D standing. With fewer resources, these small firms of less than 50 employees are hard-pressed to incorporate, let alone stay abreast of innovations that are shaping manufacturing, yet they account for almost 84 percent of all manufacturing firms in the region. Providing R&D support to the region's small manufacturers holds real potential to accelerate innovation in the cluster.


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