Local Business

Region's R&D spending plummets

PALATINE – With investment declining, the Chicago region has lost nearly half of its private research and development jobs in the last decade, according to a new report by the Chicago Metropolitan Agency for Planning.

The report contradicts the notion that the region's manufacturing industry can't be revived. It recommends ways for the seven-county region to usher in an era of advanced manufacturing through innovation, workforce development and infrastructure investment.

Some of the report's recommendations are already being employed in McHenry County and other areas.

From 1970 to 2000, the region's R&D spending tripled and it was consistently ranked the country's second largest research hub, behind New York.

But that trend reversed. The region's R&D output has fallen from nearly $6 billion in 2000 to $4.1 billion in 2010.

"During this decade-long trend the region has been losing ground against smaller innovative regions like San Diego, Boston, Silicon Valley, and San Francisco," the report said. "As these regions enhance the R&D intensities of their manufacturing clusters and the Chicago region lags behind, it becomes harder for northeastern Illinois to adopt new technologies and compete in global advanced manufacturing."

Patent output – a key indicator of innovation – declined over the same time period.

"While in 2000 the region produced the fourth most patents in the nation, by 2010 its rank had dropped to eighth," the report said. "As manufacturing relies on R&D support to fuel next-generation technologies and productivity gains, the region’s R&D decline contributes greatly to challenges that the cluster faces today."

Manufacturing firms account for more than 87 percent of the private R&D conducted in the state. Most of that is done by a small number of large firms. More than 80 percent of the state's manufacturers have fewer than 50 employees. Small firms are responsible for less than 6 percent of the state's private R&D.

"To be competitive in this hyper-competitive global economy, we need to re-establish the region as a leading center of manufacturing R&D," CMAP policy analyst Garett Ballard-Rosa said during a presentation last week at Harper College in Palatine.

The report underscored the importance of manufacturing to the region's economy.

Core manufacturing firms employed 375,000 people in 2011, about a third less than a decade earlier.

Even as it has shed jobs, manufacturing has become more productive, contributing about $64.5 billion to the larger regional economy in 2010 compared to about $51 billion in 2001. That makes it the second largest component of the region's economy behind real estate.

The regional planning agency offered a number of strategies for a rebound in advanced manufacturing.

Recommendations included implementing congestion pricing to pay for transportation infrastructure improvements, encouraging infill growth, boosting early-stage financing for innovative manufacturers, providing R&D support to small manufacturers, and offering incentives for manufactures to adopt more efficient energy systems, such as combined heat and power systems.

Locally, organizations and agencies have taken steps to address some workforce development issues.

McHenry County College has been working with local manufacturers to provide training opportunities. The McHenry County Workforce Network also has been looking for ways to close the skills gap that many manufacturers face.

Several McHenry County school districts encourage students to take more science, math, technology and engineering courses to prepare them for manufacturing careers. Organizations such as the McHenry County Economic Development Corp. – along with local manufacturing companies – have been working to counter long held stigmas about manufacturing work and promoting careers in the industry.

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