> I don't understand why executives of American companies don't see the manufacturing/production side of their companies as anything more than a cost center.
This is interesting to me, because I think of it as the stereotypical (if not always accurate) description of American business. The common criticism of American companies is that they outsource productive capacity, go "asset-lean", lever up on their intellectual property, over-financialise etc etc. I've generally thought of the preference for investing in "manufacturing/production" to be a populist sentiment, and out of favour in the boardroom.
There are certainly plenty of examples of both types, but in the semiconductor space the trend is clear -- manufacturing has been outsourced from the US, and the old big chip brands mostly stopped making their own chips.
And until recently I've been mostly sympathetic to (what I think is) your view, which I've also ascribed to the stereotype of "corporate America" -- that companies should put their capital to its most productive work, and that mostly that means "intellectual property and innovation" or some similar vague notion. Ricardian comparative advantage and all that.
One thing that's given me pause has been arguments like this: https://berthub.eu/articles/posts/how-tech-loses-out/. Very roughly, that production involves a necessary kind of innovation, and that intellectual property advantages can be less durable than process advantages.
If you haven't read "Outsourced Profits" on how and why this process occurred at Boeing and how it ended up causing problems (referenced in the above article) I'd say the document is well worth your time.
This is interesting to me, because I think of it as the stereotypical (if not always accurate) description of American business. The common criticism of American companies is that they outsource productive capacity, go "asset-lean", lever up on their intellectual property, over-financialise etc etc. I've generally thought of the preference for investing in "manufacturing/production" to be a populist sentiment, and out of favour in the boardroom.
There are certainly plenty of examples of both types, but in the semiconductor space the trend is clear -- manufacturing has been outsourced from the US, and the old big chip brands mostly stopped making their own chips.
And until recently I've been mostly sympathetic to (what I think is) your view, which I've also ascribed to the stereotype of "corporate America" -- that companies should put their capital to its most productive work, and that mostly that means "intellectual property and innovation" or some similar vague notion. Ricardian comparative advantage and all that.
One thing that's given me pause has been arguments like this: https://berthub.eu/articles/posts/how-tech-loses-out/. Very roughly, that production involves a necessary kind of innovation, and that intellectual property advantages can be less durable than process advantages.