SBE-RCUK: Co-location of manufacturing and innovation: drivers and impacts of technological innovation along the wind energy global value chain

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Many high-technology industries, including clean technology industries, have seen major geographical shifts over the past two decades in which companies expand or move manufacturing of their component supply chain to new countries. These manufacturing shifts raise questions that are important for policy, economic competitiveness, and research. Specifically, what are the reasons for firms to alter or refocus their geographic strategies and physical locations, and whether doing so changes the nature and direction of innovation that such firms undertake. This project examines these questions through the case of the global wind technology industry, where both the demand for and manufacturing of wind turbines have shifted from the United States and Europe to emerging economies, including China. The shifts in the location of manufacturing from countries at the frontier of technology to newer markets can potentially shape R&D strategies, technological innovation, and competitive advantage in the wind sector. Given policy targets for wind deployment in emerging and developing countries, additional expansion of the manufacturing of different wind turbine components to new countries is expected, which means it is important to understand the possible tradeoffs associated with the manufacturing shifts. This research informs the design of policies that spur local manufacturing, economic competitiveness, and technology development in globally-distributed, modern manufacturing industries. It also highlights the ways in which manufacturing shifts affect the ability of technological innovation to meet climate and environmental challenges in the long term, thus supporting design of national and international policies. This project analyzes the types of manufacturing that have shifted geographically and, most crucially, whether and how these international shifts in manufacturing impact the direction of innovation in the wind industry. The research focuses on component manufacturers who are often small and medium enterprises (or SMEs) that supply to original equipment manufacturers (OEMs), i.e., the 10-15 manufacturers that assemble wind turbines worldwide. SMEs are particularly relevant for a country's economy as they comprise, for example in the United States, over ninety percent of employer firms. Manufacturing SMEs must innovate to produce goods at increasingly lower costs and/or to develop new capabilities to stay competitive. The project relies on novel data of the wind supply chain at the firm level and a comprehensive mixed-methods approach, including the analysis of global data on OEM-supplier relationships, public policies, component technologies, semi-structured interviews, and patents. In understanding innovation in the global value chain for wind energy that includes both SMEs and larger OEMs, the results of the project contribute to the understanding of what drives decisions by different types of firms to manufacture in their home country or internationally, and whether the location of manufacturing influences the technological focus of innovation and the time-horizon of R&D activities undertaken in a particular industry.This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.