Knowledge is All

1
Knowledge is All
The Location of Manufacturing Innovation
(almost)

• David A. McGranahan
• Economic Research Service
• USDA

2
Why manufacturing?

• Central to rural economy
• 27 percent of rural (nonmetropolitan) private
  sector earnings
• 18 percent in urban areas
• Flexible in location
• Shift to where it can be most competitive
• Affected by globalization technological change
• Globalization reduces rural advantage of low-cost
  labor
• Product innovation (bio-tech, weaponry, software)
• Process innovation advanced technologies involve
  shift in competitive strategy to quality rather
  than simply cost, and to customer targeting
  (niche markets)
• Relevant to most industries (auto parts,
  sawmills)

3
Knowledge-clustering

• Research on industrial clusters
• Research-based industries most clustered
  (Audretch Feldman)
• Research clusters around universities (Anselin,
  Varga, Achs)
• Otherwise (except for natural resource-based
  industries) little clustering of manufacturing by
  state (Ellison and Glaeser)
• Clustering by sector declining over time
  (Duranton and Puga)
• No survey evidence of clusters for production
  linkages (hi-tech)
• Rural manufacturing not research-based
• Process innovation, not product innovation, is
  relevant in rural areas
• Advanced technologies are ubiquitous across
  industries

4
Where are rural advanced technology users found?

• USDA/ERS survey
• Small (10-50 employees), independent firms (N
  850)

• PRODUCTION
• Computer-assisted design
• Computer-assisted engineering
• Numerically- or computer-controlled machines
• Programmable controllers
• LAN on factory floor

• MANAGEMENT
• Self-directed work teams
• Job rotation
• Employee problem- solving groups/ quality
  circles
• Statistical process control
• Total quality management

• INFORMATION
• Modems
• Satellite communications
• Internet
• Computer linkages outside firm
• Fax machines

5
Plant characteristics associated with use of
advanced technologies

• All industries, although higher in some than
  others
• Larger plants
• More knowledge intensive
• RD unit
• professional-technical jobs
• production workers with HS education
• Job training
• Higher pay and benefits
• More growth in employment in previous 3 years
• Customers and suppliers less often local

6
Where are advanced technology users found?

• 3 national surveys
• Ellen Kelly White (metal working, 1 innovation)
• Bureau of the Census (broader, production
  innovations)
• USDA (all manufacturers production, management
  information technologies)
• Few answers
• Higher local education levels (HS completion)
• Disagreement on rural lag
• No effect of same-industry clusters

7
Where are rural advanced technology users found?

• Doeringer and Terkla
• Diversity is good
• Collaboration cross-fertilization labor pool
  civic climate
• ERS study results
• No effect of same industry clusters
• No rural/urban differences
• Higher local education levels (HS/some college)
• West
• No size of manufacturing sector
• But given sector size, the more different kinds
  of manufacturing industries in a county, the
  higher the level of advanced technology use (all
  major industries except food processing)

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Where is diversity found?

• Places attractive to managers and professionals
  
• Near metropolitan areas
• High proportion of college graduates in
  population
• Colleges in county
• Natural amenities/recreation
• These conditions are not themselves strongly
  related to adoption
• Only when create local cluster of diverse
  industries
• Example Hawkesbury Brattleboro
• Growth in manufacturing jobs

10
County manufacturing diversity (controlled for
employment size)
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Knowledge is All
The Location of Manufacturing Innovation
(almost)