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Harvard Survey: U.S. Competitiveness at a Crossroads

Posted By David Brousell, March 11, 2013 at 11:18 AM, in Category: Industrial Policy

Posted by David Brousell on Mar 11, 2013 3:52:08 PM

Concerned about long-term structural issues such as the educational system, the tax code, and partisan politics, business leaders are continuing to voice pessimism about the state and direction of U.S.competitiveness, according to a new survey by the Harvard Business School (HBS).

A majority of survey respondents, 58%, said they expected U.S.competitiveness to deteriorate in the next 3 years, with companies less able to compete, pay well or both. Only 25% were optimistic about the ability of companies to compete or pay well in the next few years. In addition to education, the tax code and the political system, the survey also asked about the U.S. legal system, regulations, and macroeconomic and immigration policies.

This year’s survey results actually showed some improvement in the outlook of business leaders compared to 2011. That year, the HBS survey found that 71% were pessimistic about U.S. competitiveness. The HBS study suggested that the better outlook is attributable to the opinions of leaders based outside the U.S., those working in manufacturing, those in fields insulated from international competition, and those who are liberal politically. But HBS didn’t take much heart from the new results.

“The competitiveness of the United States is indeed at a crossroads,” the report said. “We know many of the steps that government and business must take to allow firms in the U.S. to win in the global marketplace while lifting the living standards of the average American. The question is, can we muster the will, the foresight, and the unity to take those steps?”

The new survey, Harvard Business School’s second on the subject of competitiveness, was fielded largely in September of last year among Harvard Business School alumni and, for the first time, in the general U.S. population. More than 6,800 school alumni and just over 1,000 general population individuals completed the survey. The survey was conducted by HBS faculty and researchers in conjunction with Abt SRBI, a survey research firm. The report’s authors from HBS were Michael E. Porter, Jan W. Rivkin, and Rosabeth Moss Kanter.

Of all business sectors represented in the survey, manufacturing companies were the most active in undertaking programs and initiatives to boost U.S. competitiveness. The survey showed that 86% are engaged in internal training; 59% in regional initiatives; 40% in offering apprenticeships; 47% in community college or other external training partnerships; 54% in sourcing locally for supplies; and 45% in supplier mentoring. The survey also showed that manufacturers rank near the top in participation in collaborative research initiatives, with 63% involved in this activity.

“These findings point to a reason to emphasize manufacturing in efforts to improve U.S. competitiveness that is not widely understood: manufacturers tend to take actions that benefit the wider commons,” the report said.

The subject of reshoring, when looked at across the full survey sample, however, generated only minor support. The HBS report showed that only 17% of respondents had brought back to the U.S. an activity that had been performed overseas. The research also found that just under one-third of manufacturing leaders are interested in reshoring. Reshoring was also an activity that the largest portion of survey respondents said did not apply to their firms.

“Appeals to bring activities back to the U.S. without real improvements in the U.S. business environment are unlikely to succeed,” the report said.

Among the report’s numerous findings, were these:

  • Feelings about competitiveness varied based on respondents’ political orientations. Among what the study termed “strongly liberal” business leaders, pessimism about the trajectory of U.S. competitiveness declined to 53% in 2012, from 72% in 2011. Among those “strongly conservative”, pessimism was persistent, declining to 65% in 2012, from 71%;
  • The complexity of the national tax code was perceived by respondents as worse in 2012, despite the general overall outlook improvement;
  • Feelings about the K-12 education system, the regulatory environment, and the availability of skilled labor also bucked the overall finding of improvement;
  • General public respondents to the survey saw the quality of corporate management, the conditions for entrepreneurship, and the vibrancy of capital markets as weaker than business leaders, but business leaders believed more strongly that the U.S. is failing to keep pace with emerging economies in China and India;
  • Nevertheless, only 43% of the general public was pessimistic about the future of U.S.competitiveness, compared with 61% of U.S. business leaders.

The HBS study recommended four initiatives that business leaders can pursue collectively, or in concert with government, to enhance competitiveness. They are: accelerate actions to collaboratively build skills, ensuring a “work-ready” talent supply; undertake a national campaign to engage companies to mentor high potential U.S. suppliers; enhance the role that education and health care institutions play in competitiveness, and create a national “Bureau of Business Actions to Enhance Competitiveness” that provides an inventory of recommended actions by business, region by region.

As a manufacturer, do you think these four recommendations are sufficient to improve U.S. business competitiveness? What suggestions do you have to improve things?

Category: Industrial Policy
Written by David Brousell

Global Vice President, General Manager and Editorial Director of the Manufacturing Leadership Council

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