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Georgia Manufacturing Study Cites Importance of Innovation

Georgia Manufacturing Survey underscores the importance of innovation as a competitive strategy

A study of nearly 650 Georgia manufacturers underscores the important of innovation as a competitive strategy, at a time when international outsourcing continues to take its toll on the state's manufacturing community. The 2005 Georgia Manufacturing Study shows that companies competing on the basis of innovative products or services enjoy higher returns, pay better wages and have less to fear from outsourcing than other manufacturers.

Georgia manufacturers that rely on innovation for their competitive edge reported returns on sales 50% higher than companies that compete by providing low cost products. Innovative companies paid workers a third more than the average Georgia manufacturer and were 40% less likely to lose work to outsourcing than companies that compete on low cost.

The survey of Georgia manufacturers, part of a periodic study begun more than a decade ago, was conducted by the Office of Economic Development and Technology Ventures and the School of Public Policy at the Georgia Institute of Technology.

"Innovation, whether in products or processes, or in organization or services to customers, is one of the main paths through which manufacturers can become more distinctive, secure market premiums, satisfy customers, expand sales, reward workers and improve their bottom line," explained Phil Shapira, a professor in Georgia Tech's School of Public Policy and a study co-author. "Companies that do not continuously innovate will find themselves under increasing pressure from low-cost producers in the United States and globally."

Offering innovative products gives companies a competitive edge that provides protection against outsourcing and allows them to charge a premium - which creates higher margins and allows higher wages, notes Jan Youtie, a researcher in Georgia Tech's Office of Economic Development and Technology Ventures and another study co-author. "If a company competes on the basis of innovation, that usually means only a few other companies are offering similar products," she said.