Shifting Innovation Centers: The Decline of the “Industrial Commons” in the U.S.

The Shift in Strategy

Many U.S. firms have long had a simple mantra: “Invent here, manufacture there.” But, increasingly, those same companies are now choosing to invent as well as manufacture abroad.

A Changing Landscape

From automotive to semiconductors to pharma to clean energy, America’s innovation centers have shifted east, offering growing evidence that the U.S. has lost what Harvard Business School’s Willy Shih calls the “industrial commons”: indispensable production skills and capabilities.

The Consequences

It’s not just that virtually all consumer electronics are designed and made overseas. It’s that the U.S. has lost the underlying capacity to make products like flat-panel displays, cell phones, and laptops; nearly half of the foreign R&D centers established in China now belong to U.S.-based companies.

The Impact on the U.S. Economy

The decline of the industrial commons has significant implications for the U.S. economy. Without the ability to manufacture complex products, the country is left relying on imports, which can lead to trade deficits and a loss of domestic jobs.

A Changing Business Landscape

The shift in innovation centers also changes the business landscape. Companies that once focused on research and development in the U.S. are now looking to Asia, particularly China, for their manufacturing needs. This shift has significant implications for the U.S. job market, as well as the country’s economic competitiveness.

Conclusion

The decline of the industrial commons in the U.S. is a significant trend that has far-reaching implications for the country’s economy and business landscape. As companies continue to shift their innovation centers abroad, it is essential to understand the consequences of this shift and to develop strategies to mitigate its impact.

FAQs

Q: What is the industrial commons?
A: The industrial commons refers to the indispensable production skills and capabilities that are necessary for a country to manufacture complex products.

Q: Why is the U.S. losing its industrial commons?
A: The U.S. is losing its industrial commons due to a shift in innovation centers abroad, particularly in Asia, and a lack of investment in domestic manufacturing capabilities.

Q: What are the implications of losing the industrial commons?
A: The implications of losing the industrial commons include a loss of domestic jobs, trade deficits, and a decline in the country’s economic competitiveness.