Georgia Manufacturing Survey 2010: Recession Makes Innovation More Critical Than Ever for Competitiveness

The recession has expanded the business advantages of Georgia manufacturers that compete on the basis of innovation in new or technologically improved products, processes, organizational structures or marketing practices.  These innovative companies are more than twice as profitable as firms competing on the basis of low price.

That’s one conclusion of the 2010 Georgia Manufacturing Survey, which also found that companies are preparing for post-recession growth, expanding export capabilities, addressing sustainability issues – and still dealing with out-sourcing and in-sourcing.  The survey, which included nearly 500 manufacturers, was conducted by Georgia Tech’s Enterprise Innovation Institute, the Georgia Tech School of Public Policy, and Kennesaw State University, with support from the Georgia Department of Labor and accounting firm Habif, Arogeti & Wynne, LLP.

Georgia has approximately 10,000 manufacturers that provide nearly 350,000 jobs and account for 11 percent of the gross state product.  Workers in manufacturing companies earn wages averaging nearly twice those of workers in retail companies.

The survey found a widening profitability gap between manufacturers that compete on the basis of innovation compared to those that use other competitive strategies.  That gap has grown in each survey conducted since 2002.

“Companies that compete on the basis of innovation are much more profitable, pay higher wages and more likely to benefit from in-sourcing opportunities than firms that compete on low price,” said Jan Youtie, the survey’s director and a principal research associate in Georgia Tech’s Enterprise Innovation Institute.  “Adoption of an innovation strategy can be useful to manufacturers regardless of industrial segment, and is especially important during difficult economic times.”

As part of the survey, companies were asked to rank six competitive strategies for their importance to winning sales.  More than half of the respondents mentioned “high quality,” while approximately 20 percent chose “low price” or “adapting to customer needs.”  Fewer than 10 percent reported “innovation/new technology” as a primary competitive strategy.

Across all six strategies, innovation was associated with the highest mean return on sales: 14 percent, compared to just six percent for the low-price strategy.  And those financial benefits extended to workers, whose annual salaries averaged $10,000 per year more at innovative manufacturers than at other companies.

The top five innovative tactics reported by respondents were (1) working with customers to create or design a product, process or other innovation, (2) signing a confidentiality agreement to access a new product or process, (3) working with suppliers to create or design a product, process or other innovation, (4) purchasing new equipment, and (5) conducting research and development activities in-house.

While manufacturers of technology products are most often associated with the strategy, innovative companies can be found in all industrial segments, said Philip Shapira, co-director of the survey and professor in the Georgia Tech School of Public Policy.

“Many people think that innovation is something that has to be done in a lab, but our results show that innovation occurs more broadly, particularly as companies partner with customers and suppliers to take into account their needs for a new product or process,” he explained.  “While high technology companies tend to be innovative by their nature, innovation occurs across all segments, and every firm has opportunities to be innovative.”

Companies often cite cost as a reason for not innovating, but Shapira noted that only 10 percent of companies take advantage of R&D tax credits; fewer still use investment tax credits.  “While financial incentives can assist innovation, there is a greater need to build awareness and capabilities among more of the state’s firms to undertake innovation,” he said.

Though more than two-thirds of Georgia’s manufacturers have cut jobs or lost sales in the recession, many of these companies are now looking toward the future with plans for locating new customers, boosting capital investment, expanding research and development and continuing to reduce costs.

“When we look at their plans, Georgia manufacturers are in an expansive mood, looking for new customers and getting ready for the next phase of economic growth,” Youtie said.

The survey found that 70 percent of respondents were looking for new customers, 20 percent planned to expand capital investment, and 15 percent planned to increase expenditures on research and development.  At the same time, 60 percent of respondents said they still planned to cut costs.

Another trend studied was growth in the number companies selling to international markets.  More than half of the responding manufacturers said they were exporters – and those manufacturers reported 50 percent higher profitability than non-exporters.  Some 22 percent of respondents had increased their export sales since the last survey in 2008.

“We don’t find much difference between exporting companies when comparing them by the amount they export,” Youtie noted.  “What seems to be important is the capability to export.  We think there is some learning that takes place, and some capability that a company develops to become an exporter.  That capability translates into improved performance across the board, in addition to creating new markets and different margins.”

The survey also found that out-sourcing of work has leveled off, with approximately 16 percent of manufacturers affected by the loss of business in 2010.  At the same time, the percentage of firms benefitting from in-sourcing – movement of work to Georgia – has grown to nearly 15 percent.

“Out-sourcing isn’t going away, but it has stabilized,” Youtie said.  “In-sourcing appears to be growing, which creates opportunities for good manufacturers to benefit from consolidation of production from other U.S. facilities or even from overseas.”

The study also looked at sustainability issues, and found that 60 percent of companies recycle and attempt to reduce waste – one form of sustainability.  However, just 11 percent of respondents had inventoried their carbon footprints or emissions, and fewer than five percent were using renewable energy.

The bottom line for manufacturers?

“The results of our survey can point manufacturers to a way forward for getting ready for the next phase,” said Youtie.  “Companies can develop innovation capabilities; they can look into exporting and they can collaborate more with suppliers and customers.”

Research News & Publications Office
Enterprise Innovation Institute
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Media Relations Contact: John Toon (404-894-6986)(jtoon@gatech.edu).

Writer: John Toon

Cochran Book Asserts John Dewey’s Lasting Influence

John Dewey (1859–1952) was a major figure of the American cultural and intellectual landscape in the first half of the twentieth century. A new book edited by Molly Cochran for the prestigious book series, The Cambridge Companions to Philosophy, examines the wide range of Dewey's thought and provides a critical evaluation of his philosophy and its lasting influence in philosophy and other disciplines.

While not the originator of American pragmatism, Dewey was instrumental to its articulation as a philosophy and the spread of its influence beyond philosophy to other disciplines. Cochran’s The Cambridge Companion to Dewey (Cambridge University Press) encompasses the wide range of Dewey’s prolific writings on metaphysics, philosophy of mind, cognitive science, psychology, moral philosophy, the philosophies of religion, art, and education, and democratic political and international theory.

“I took on this project because the Cambridge Companions is the “go-to” series for anyone seeking the state of the literature at that moment on the great philosophers consults, and I believed that Dewey deserved a place in that series," said Cochran, an associate professor in the Sam Nunn School of International Affairs.  “America is not typically viewed as having a rich philosophical culture, but American pragmatism had, in the first half of the 20 ^th century, a major impact in philosophy and it is enjoying a resurgence again today. One example is James Kloppennerg’s recent book, Reading Obama, which links Obama’s approach to politics to this philosophical tradition in which Dewey was a key contributor.”

The book is considered a resource for both the novice and the specialists since it encompasses both an introduction to Dewey’s work as well as more technical details. Chapters by each contributor provide a brief account of the current state of a field of study or discipline and capture the breadth of Dewey's thought within philosophy as a discipline and beyond.

Cochran is working on a manuscript for a new book titled International Publics: Agents of Democratic Change in World Politics.

NSF Award Enables Fox' Innovative Project on Transmission of Knowledge about Women in Science and Engineering

Mary Frank Fox, ADVANCE professor, School of Public Policy, has been awarded a two-year $300,000 grant by the National Science Foundation as Principal Investigator for the study of “The Transmission Zone between the Producers and Consumers of Knowledge about Women in Science and Engineering.”

Fox and her collaborator, Gerhard Sonnert (Harvard University), were motivated to undertake this project because a deep gap continues to divide the research producers and the broader consumers of knowledge about women in science and engineering—with some consumers (including working scientists) experiencing frustration about not being able to get pertinent knowledge in a form that works for them. Although a wealth of data and knowledge about women in science and engineering exists, this knowledge often fails to reach intended consumers: working scientists, students, administrators, and all those interested in understanding and enhancing the participation and performance of women in science and engineering.

Fox’s project is a strategic study that investigates the key dimensions of the problem of this “transmission zone” and identifies blockages and inefficiencies in the current system of transmission of knowledge, with broader implications for promising initiatives and models of such transmission.

Using multiple methods—bibliometric means, individual interviews, and organizational analyses—the project is innovative, even unique. It takes knowledge about women in science and engineering as a focal case, and recognizes and addresses the transfer of knowledge from producers to consumers as “non-automatic,” and more problematic, than previously assumed in prevailing research about the diffusion of knowledge.

Fox says “this project takes a leap from research and theory on diffusion of knowledge that has preceded it. It goes beyond the passive broadcast model of knowledge, and aims to identify and understand active and effective agents of knowledge transmission in the nationally and internationally critical area of women in science and engineering. The project intends to map the various channels of diffusion, identifying ways in which effective diffusion of knowledge about women in science and engineering can overcome costs of cognitive load, effort, and time among potential consumers. In reality, the broadcast model of publication may suffice for scientists when working within their own research subareas, but ‘knowledge transfer’ does not operate in this way when the targeted audience goes well beyond non-specialists who, nonetheless, have a crucial need to know.”

Wood Takes the Toaster - DramaTech Students Honor Professor

DramaTech honored Robert Wood during their Saturday, November 6 production of the The Count of Monte Cristo Wood presenting him with its highest honor – an engraved toaster.

Wood, professor in the School of Literature, Communication, and Culture (LCC) which houses the student-run theatrical group, has been the company’s faculty advisor for thirty years. He is beloved by the company for his wit and wisdom and for energy and efforts that go “above and beyond” his advising duties explained DramaTech Artistic Director Melissa Foulger. In the past few years, Wood stepped in after the passing of long-time artistic director, Greg Abbott to guide the student organization through a period of mourning and its search for a new director (Foulger).  In 2009, he directed DramaTech's production of Twelfth Night .

“He has organized, acted, and directed, and has held the hand of many a student trying to overcome stage fright,” said Carol Senf, professor and associate chair of LCC. “It was incredibly moving to hear the students offer tribute to him.”

The now iconic toaster first appeared in the mid-eighties during an impromptu art installation called "Toaster Dreams" that featured furnishings suspended from the overhead grid. At the center of the design and prominently lit was a toaster.  Thereafter, the toaster began popping up in productions, always hidden in plain sight. Now a venerated tradition, the toaster is even part of the DramaTech logo.

“For DramaTech, there is no higher award than a toaster!” said Wood upon receiving the award.

Auslander at International Theatre Olympics

Philip Auslander, professor in the School of Literature, Communication, and Culture, presented at the closing symposium of the 5 ^th Annual International Theatre Olympics held in Seoul, South Korea October 30. 

A scholar of performance studies who specializes in the relationships among performance, media, and technology, Auslander was one of four international scholars and critics asked by the Korean Theater Studies Association to present on the theme of Crossing Borders: Performance/Body/Media.  The Symposium also explored the “Outlook for 21st Century Theatre and included scholars, critics and directors from Belgium, Greece, India, Italy, and Japan. An international artistic event, the Theatre Olympics brings together directors, playwrights, scholars and critics from around the world and this year showcased performance and productions from Russia, India, France, Israel, Korea and other countries.

Six President’s Undergraduate Research Awards to Ivan Allen College

Ivan Allen College was awarded six of the increasingly competitive and prestigious President’s Undergraduate Research Awards (PURA) for Spring 2010.  Winning students were:

Denise Bringslid, mentored by School of History, Technology & Society Chair Ronald H. Bayor, for “Determining the Implications of Re-segregation in the Atlanta Public School System” 

Thea Kromer, mentored by School of History, Technology & Society Chair Ronald H. Bayor and Professor Willie Pearson, Jr., for “The Interlocking Relationships Between American Indian-White European History and the American Indian Movement”

Madeline Cook, mentored by Sam Nunn School of International Affairs Associate Professor Kirk S. Bowman, for “Peddling Paradise: The Role of the City Historian’s Office in Creating a Global Brand in Habana Vieja”

Jared Fry, mentored by Sam Nunn School of International Affairs Assistant Professor Margaret E. Kosal, for “WMD in Gaming”

Matthew Lynch, mentored by School of Public Policy Professor Marilyn A. Brown for “How Can the Lessons of Hawaii's Energy Policy Be Applied to Georgia?”

Alec Manfre, mechanical engineering major mentored by School of Public Policy Professor Marilyn A. Brown, for “How Can the Lessons of Hawaii's Energy Policy Be Applied to Georgia?”

Graduate Student Profile - Gloria "Glo" Ross, HTS

Urban agriculture can provide communities with environmental sustainability and a reliable food source; they can also generate social, economic, and energy-saving benefits.

Ph.D. student and community-organizer Gloria “Glo” Ross researches the social, economic, and technological landscape of urban agriculture and explores models for developing community gardens. “What does it look like for an urban area to be environmentally sustainable using urban agriculture and urban gardening? And what does it look like for communities to actually guide that process?”

Ross is in her second year in the History, Technology, and Society (HTS) Ph.D. program. Atlanta is an ideal city for Ross to conduct her research. There are many existing urban garden systems that were built from successful models. There are production-oriented gardens, where residents farm on individual plots where they can grow their own food and harvest it for themselves. In community-supported systems, several members of the community put forth a collective effort to grow and harvest the food as products, and the contributing members divide the earnings. Another model is strictly educational, where the food is a byproduct but the purpose is to educate the members of the community about agricultural systems and gardening. There are many Atlanta communities that have potential for using these models to build successful urban agriculture systems, but are presented with difficult challenges. It is these communities that Ross has focused her energy on to help guide the planning process and overcome the challenges.

Ross is particularly inspired by the work happening in English Avenue, East Point, and Edgewood. These neighborhoods are close-knit communities, but suffer from low property values, abandoned homes, and crime. Ross questions, “What’s happening in communities that have particularly been disinvested? What are they envisioning? What do they see in their future to strengthen their communities and to strengthen their safety and their role in the economy?”

Urban gardens may not seem like a priority in neighborhoods facing social and economic challenges every day, but gardens have the potential to turn neighborhoods like these around. And people in these communities envision urban gardens. Ross spoke with a woman in English Avenue who expressed her desire for a community garden but was unsure of how to make it a reality. She asked if she could start a garden in the yard of the abandoned home across the street, unsure of who owned the property. The woman obviously wanted to improve the neighborhood, but didn’t know where to start.

Ross understands community challenges and knows how to plan and implement successful public projects. In New York City, she worked with homeless lesbian, gay, bisexual, and transgender (LGBT) youth on a project to develop a public garden space. Ross worked with architects, public planners, and the community to put the project together. In order to plan a successful urban garden in Atlanta, Ross knows that she will need to navigate both the political system and neighborhood organization and help bridge the gap between them. In her current research, she is examining what plans exist for Atlanta, what is needed by communities here, and the alignments and disparities between the two. She’s also exploring the process for merging those efforts. Ross notes that “sourcing local food” is a benchmark of the strategic plan for the City of Atlanta put forth by Mayor Kasim Reed. Atlanta also aspires to be an environmentally sustainable city. Ross is preparing feasibility studies incorporating qualitative data from the communities with the intention of presenting those to the Mayor’s office. Ross will participate in an initiative to assist Westside communities to develop patterns of sustainability spearheaded by Ivan Allen College Dean Jacqueline J. Royster and Dean Alan Balour in the College of Architecture.

Story by Lauren Langley, Master's Student, Digital Media Program