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Op-Ed

What’s boosting U.S. manufacturing? Networked innovation.

As economists debate the prospects for the future pace of innovation, a study by innovation specialists Ashish Arora, Wes Cohen, and John Walsh—published by the prestigious National Bureau of Economic Research—indirectly helps buttress the optimists’ case.

The research team examined more than 6,000 U.S. manufacturers and service-sector firms between 2007 and 2009 regarding the extent to which innovators relied on external sources of invention. They found that 18% of manufacturing firms had innovated by introducing a new product; of these, almost half (49%) reported that the idea behind their most important new product had come from outside the company –through customers, suppliers, or technology specialists. Using a statistical model, the authors conclude that without outsiders providing the stimulus for innovation, the share of innovating firms in the U.S. manufacturing sector would drop from 18% to 10%.

The trend toward “networked innovation”—an updated version of the “open innovation” concept popularized by University of California at Berkeley business strategist Henry Chesbrough—is encouraging. It indicates that businesses recognize that to remain competitive they need to harness as much brainpower as they can and that not all, or even most, of it resides within their company.

We are only in the beginning stages, however, of firms reaching beyond their silos to the outside world for innovative ideas, because the tools to facilitate this—including search engines such as Google and Bing and business-oriented social networking sites like LinkedIn—have been around for relatively few years. As more tools for connecting people and businesses and their ideas to each other are developed and refined, and proliferate, the pace of innovation will speed up. The innovation optimists should be smiling–as should companies that remain open to adapting ideas originated by others.

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