One reason for the decline in U.S. industrial competitiveness is the sorry performance of many of the nation's 355,000 small manufacturers. These companies represent nearly 99% of American manufacturers and employ 40% of the country's manufacturing workers. Yet many studies have found that they lag far behind their Japanese counterparts in using computer-controlled machine tools and other key technologies, as well as in implementing quality programs.
But the companies aren't solely to blame. A new report from Georgia Institute of Technology's School of Public Policy points out that federal and state aid to small manufacturers totals only $80 million a year--and reaches less than 3% of companies. By contrast, Japan spends $500 million annually to fund a network of 170 technology extension centers--and billions more to transfer technology to companies. So it's no surprise that the Georgia Tech study recommends a big boost in similar U.S. efforts. One possible approach, suggests study leader Philip Shapira, would be to create a technology version of the U.S. agricultural-extension service. Says Shapira: "An effective industrial-extension system is critical to help companies modernize their operations and products."