Posted January 22, 2003 Atlanta
Researchers from Georgia Tech's Economic Development Institute (EDI) and School of Public Policy found that on average, annual wages were $10,000 higher at innovative manufacturing firms and returns on sales were almost a full percentage point higher.
However, a majority of Georgia manufacturers are competing based on cost rather than innovation. According to EDI researcher Jan Youtie, that's a bad sign because companies competing on low cost are vulnerable to competition from international producers with even lower costs.
The study also showed that more than half of Georgia's manufacturers underwent major changes in strategy or structure in the last two years, and that company concerns have shifted from information technology to marketing and new product development -- with nearly two-thirds of manufacturers now improving or developing new products.
"What was disturbing in this survey is that even more of our manufacturers competed on low price than had taken this approach in the last survey, when we were in a growth economy," said Youtie. "So when faced with a stressful economic situation, rather than innovating their way out, they are trying to get out of it by dropping their prices. That's not a good long-term strategy for global competition.
Researchers defined innovative companies as those that were developing new products or processes, improving products or processes, or changing organizationally. Researcher Philip Shapira, a professor in the Georgia Tech School of Public Policy, notes that innovation isn't restricted to companies considered to be "high technology."
"There can be innovative companies in traditional sectors such as textiles, food and apparel," he said. "It may be that they use these process and organizational methods to give themselves leverage in the marketplace in order to distinguish themselves from other companies."