Institutions, public policy and the product life cycle : the globalization of biomanufacturing and implications for Massachusetts

Globalization has brought about a major shift in our understanding of how companies organize themselves and how they compete. The fragmentation of firms in their scope and structure, the vertical disintegration of firms through greater outsourcing, and the rise of global supply and value chains has led to new visions for companies ("metanational companies") and new models of production ("modular production networks") that "break free" from geography. In this global economy, many believe that manufacturing has little future in a high-skilled, high-wage region, given competition from lower cost countries. High-tech regions like Silicon Valley and Boston's Route 128 need to focus on design and innovation, and "let others produce what Americans think up." Proponents of this vision dismiss classic models like product life cycle theory (Vernon 1966), which explain the location of manufacturing through the timing of innovation and the maturity of products. To these critics, this model no longer holds because of the ubiquitous nature of innovation, the growth of advanced markets in emerging economies, and the ability to move manufacturing offshore before a product is even standardized. In this view, it is almost inevitable that manufacturing beyond prototypes cannot survive in high-wage countries like the U.S. This attitude, however, presents a false dichotomy between innovation and manufacturing.