From Prof David Upton and Prof Gary P. Pisano.

Sir, John Kay (“ Why you can have an economy of people who don’t sweat” October 20) missed important points. The effectiveness of activities such as engineering consulting or biotech development are highly dependent on having people actually manufacturing the associated products locally. Our research shows that this is increasingly so. In many technology intensive contexts – for example, advanced materials, semiconductors, biotechnology – the real innovation occurs in the manufacturing process. Lose that manufacturing and you lose the capacity for innovation. The fact that design activities may be present after manufacturing goes may simply be a lagged effect. And once the manufacturing skills are exported – often irrevocably – how long before the associated services go too?

The services he describes are not so difficult to learn in economies investing more in education and training than we are. And that learning rate is steepened by the close geographical interaction between manufacturer and service provider; division of labour, yes – but not separation. China’s leverage of local manufacturing into design and development may hint at the future path. And manufacturing will be hard to bring back even when wage rates rise in the developed world if we simply don’t know how to do it any more.

The notion that services, not manufacturing, is where the high wage knowledge-intensive jobs of the future lie would quickly be dispelled by a tour of a Rolls-Royce aircraft engine factory or an Intel semiconductor plant. The old metal bashing factories are a popular, but anachronous, picture of modern manufacturing. If economies like the UK and the US want to provide a growing standard of living for their citizens, high wage, knowledge intensive jobs are important. But the potential for those types of jobs can be found on the plant floors of Glasgow (and Shanghai, Bangkok and Kuala Lumpur) as well as on the trading floors of London.

Many wish it were true that manufacturing is no great loss: a clever country can outsource such grimy activities, and its absence will not turn us into a nation of hairdressers. We will be sharpening our scissors.

David Upton,

American Standard Companies Professor of Operations Management,

Saïd Business School, Oxford University, UK

Gary P. Pisano,

Harry E. Figgie Professor of Business Administration,

Harvard Business School,

Boston, MA, US

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