According to the article “Restoring American Competitiveness” by Gary P. Pisano and Willy C. Shih, the United States industries have worn down competition through the damages from outsourcing manufacturing. There are several issues that have caused serious problems to the U.S. economy, which have caused the decline of trade due to shortage of innovation and competition. Theses problems are lack of funding for research and development by government and businesses and poor financial decisions made by management for outsourcing. There are several recommendations that the government and business executives can do to rebuild U.S. industries.
The U.S. industries have been outsourcing manufacturing for several decades now. U.S. companies thought they were reducing costs by outsourcing development, manufacturing, and process-engineering abilities. Consequently, U.S. corporations’ knowledge, skilled workers, and supply chain, which are the necessities to producing advanced products, have vanished. For example, almost all notebook computers, cell phones, and handheld devices, which were once created in the U.S., are now designed in Asia. When a major U.S. company outsource, it pressures their rivals to do the same thing. They also lose the expertise of process engineering, which would interact with manufacturing on a daily basis. Minor companies and skilled workers go to where the jobs and knowledge networks are no matter where they are geographically in the world. This decline of trade in the U.S. has caused a negative chain reaction to their suppliers of sophisticated materials, tools, production equipment, and components. U.S. industries do not have a way of coming up with new ideas for the next generation of high-tech products, which are needed for economic growth.
Research and development are part of the basis for innovation and competition, which create high-tech manufacturing. Some universities and some large corporations may have implanted these capabilities within their facilities. Federal and state governments used to be very involved in supporting high-tech ideas, but due to the arguing in Washington between two political groups not much has been done. Major companies that have outsourced have cut funding to research and development, since their contractors took over these activities. As a result, neither government nor main corporations are providing for long-term research and development funding and have negatively affected the industrial commons.
When making outsourcing decisions, management increased short-term cost benefits, while cutting their spending in fundamental research. These executives where listening to business leaders and Wall Street’s advice to concentrate on their main competencies, divert their savings to innovation, and get rid of their activities that consume resources and added little value to their customers. Their managers were saying that they could go back to their original plan if the quality of the...