The January/February issue of technology review (TR) and the March issue of the Harvard Business Review (HBR) both contain fascinating articles on the relationship between innovation and manufacturing that point out significant problems with the generally accepted view of globalization. Since both globalization and innovation are important for higher education, this new discussion provides additional background for some of the major issues discussed in this blog.
Globalization, as generally defined, involves modularization of product creation, production and sales, with individual modules being carried out wherever on the globe they can "best" be performed - where "best" will be defined according to different criteria by different companies (see post Globalization and Internationalization). However, in many industries a typical result has been to offshore the manufacturing component of the process in search of production that is cheaper than domestic production.
Too many American companies base decisions about how to source manufacturing largely on narrow financial criteria, never taking into account the potential strategic value of domestic locations. Proposals for plants are treated like any other investment proposal and subjected to strict return hurdles. Tax, regulatory, intellectual property, and political considerations may also figure heavily in the conversation. But executives, viewing manufacturing mainly as a cost center, give short shrift to the impact that outsourcing or offshoring it may have on a company’s capacity to innovate. Indeed, most don’t consider manufacturing to be part of a company’s innovation system at all.