{"62207":{"#nid":"62207","#data":{"type":"news","title":"Recession Makes Innovation More Critical to Georgia Manufacturers","body":[{"value":"\u003Cp\u003EThe 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. \u003C\/p\u003E\u003Cp\u003EThat\u0027s 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\u0027s 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 \u0026amp; Wynne, LLP. \u003C\/p\u003E\u003Cp\u003EGeorgia 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. \u003C\/p\u003E\u003Cp\u003EThe 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. \u003C\/p\u003E\u003Cp\u003E\u0022Companies 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,\u0022 said Jan Youtie, the survey\u0027s director and a principal research associate in Georgia Tech\u0027s Enterprise Innovation Institute. \u0022Adoption of an innovation strategy can be useful to manufacturers regardless of industrial segment, and is especially important during difficult economic times.\u0022 \u003C\/p\u003E\u003Cp\u003EAs 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 \u0022high quality,\u0022 while approximately 20 percent chose \u0022low price\u0022 or \u0022adapting to customer needs.\u0022 Fewer than 10 percent reported \u0022innovation\/new technology\u0022 as a primary competitive strategy. \u003C\/p\u003E\u003Cp\u003EAcross 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. \u003C\/p\u003E\u003Cp\u003EThe 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. \u003C\/p\u003E\u003Cp\u003EWhile 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. \u003C\/p\u003E\u003Cp\u003E\u0022Many 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,\u0022 he explained. \u0022While high technology companies tend to be innovative by their nature, innovation occurs across all segments, and every firm has opportunities to be innovative.\u0022 \u003C\/p\u003E\u003Cp\u003ECompanies often cite cost as a reason for not innovating, but Shapira noted that only 10 percent of companies take advantage of R\u0026amp;D tax credits; fewer still use investment tax credits. \u0022While financial incentives can assist innovation, there is a greater need to build awareness and capabilities among more of the state\u0027s firms to undertake innovation,\u0022 he said. \u003C\/p\u003E\u003Cp\u003EThough more than two-thirds of Georgia\u0027s 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. \u003C\/p\u003E\u003Cp\u003E\u0022When 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,\u0022 Youtie said. \u003C\/p\u003E\u003Cp\u003EThe 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. \u003C\/p\u003E\u003Cp\u003EAnother 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. \u003C\/p\u003E\u003Cp\u003E\u0022We don\u0027t find much difference between exporting companies when comparing them by the amount they export,\u0022 Youtie noted. \u0022What 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.\u0022 \u003C\/p\u003E\u003Cp\u003EThe 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. \u003C\/p\u003E\u003Cp\u003E\u0022Out-sourcing isn\u0027t going away, but it has stabilized,\u0022 Youtie said. \u0022In-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.\u0022 \u003C\/p\u003E\u003Cp\u003EThe 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. \u003C\/p\u003E\u003Cp\u003EThe bottom line for manufacturers? \u003C\/p\u003E\u003Cp\u003E\u0022The results of our survey can point manufacturers to a way forward for getting ready for the next phase,\u0022 said Youtie. \u0022Companies can develop innovation capabilities; they can look into exporting and they can collaborate more with suppliers and customers.\u0022 \u003C\/p\u003E\u003Cp\u003E\u003Cstrong\u003EResearch News \u0026amp; Publications Office\u003Cbr \/\u003EEnterprise Innovation Institute\u003Cbr \/\u003EGeorgia Institute of Technology\u003Cbr \/\u003E75 Fifth Street, N.W., Suite 314\u003Cbr \/\u003EAtlanta, Georgia 30308 USA\u003C\/strong\u003E \u003C\/p\u003E\u003Cp\u003E\u003Cstrong\u003EMedia Relations Contacts\u003C\/strong\u003E: John Toon (404-894-6986)(\u003Ca href=\u0022mailto:jtoon@gatech.edu\u0022\u003Ejtoon@gatech.edu\u003C\/a\u003E) or Nancy Fullbright (912-963-2509)(\u003Ca href=\u0022mailto:nancy.fullbright@innovate.gatech.edu\u0022\u003Enancy.fullbright@innovate.gatech.edu\u003C\/a\u003E). \u003C\/p\u003E\u003Cp\u003E\u003Cstrong\u003EWriter\u003C\/strong\u003E: John Toon \u003C\/p\u003E","summary":null,"format":"limited_html"}],"field_subtitle":"","field_summary":[{"value":"\u003Cp\u003EThe 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.\u003C\/p\u003E","format":"limited_html"}],"field_summary_sentence":[{"value":"The 2010 Georgia Manufacturing Survey shows the value of innovation."}],"uid":"27303","created_gmt":"2010-10-17 00:00:00","changed_gmt":"2016-10-08 03:07:38","author":"John Toon","boilerplate_text":"","field_publication":"","field_article_url":"","dateline":{"date":"2010-10-17T00:00:00-04:00","iso_date":"2010-10-17T00:00:00-04:00","tz":"America\/New_York"},"extras":[],"hg_media":{"62208":{"id":"62208","type":"image","title":"Manufacturing at Temcor","body":null,"created":"1449176355","gmt_created":"2015-12-03 20:59:15","changed":"1475894539","gmt_changed":"2016-10-08 02:42:19","alt":"Manufacturing at Temcor","file":{"fid":"191430","name":"tgs56561.jpg","image_path":"\/sites\/default\/files\/images\/tgs56561_0.jpg","image_full_path":"http:\/\/tlwarc.hg.gatech.edu\/\/sites\/default\/files\/images\/tgs56561_0.jpg","mime":"image\/jpeg","size":1149096,"path_740":"http:\/\/tlwarc.hg.gatech.edu\/sites\/default\/files\/styles\/740xx_scale\/public\/images\/tgs56561_0.jpg?itok=tQ_zQsrp"}}},"media_ids":["62208"],"related_links":[{"url":"http:\/\/innovate.gatech.edu\/","title":"Enterprise Innovation Institute"},{"url":"http:\/\/www.spp.gatech.edu\/","title":"School of Public Policy"},{"url":"http:\/\/stip.gatech.edu\/wp-content\/uploads\/2010\/10\/GMS-2010.pdf","title":"2010 Georgia Manufacturing Survey"}],"groups":[{"id":"1188","name":"Research Horizons"}],"categories":[{"id":"129","name":"Institute and Campus"},{"id":"139","name":"Business"},{"id":"131","name":"Economic Development and Policy"},{"id":"135","name":"Research"}],"keywords":[{"id":"287","name":"Competitiveness"},{"id":"341","name":"innovation"},{"id":"215","name":"manufacturing"}],"core_research_areas":[],"news_room_topics":[],"event_categories":[],"invited_audience":[],"affiliations":[],"classification":[],"areas_of_expertise":[],"news_and_recent_appearances":[],"phone":[],"contact":[{"value":"\u003Cp\u003E\u003Cstrong\u003EJohn Toon\u003C\/strong\u003E\u003Cbr \/\u003EResearch News \u0026amp; Publications Office\u003Cbr \/\u003E\u003Ca href=\u0022http:\/\/www.gatech.edu\/contact\/index.html?id=jt7\u0022\u003EContact John Toon\u003C\/a\u003E\u003Cbr \/\u003E\u003Cstrong\u003E404-894-6986\u003C\/strong\u003E\u003C\/p\u003E","format":"limited_html"}],"email":["jtoon@gatech.edu"],"slides":[],"orientation":[],"userdata":""}}}