What Goes On under the Hood? How Engineers Innovate in the Automotive Supply Chain

Susan Helper, Jennifer Kuan

Chapter in NBER book U.S. Engineering in a Global Economy (2018), Richard B. Freeman and Hal Salzman, editors (p. 193 - 214)
Conference held September 26-27, 2011
Published in April 2018 by University of Chicago Press
© 2018 by the National Bureau of Economic Research

The questions addressed in this volume are motivated by the recognition that engineers play an important role in generating innovation and economic growth. In this chapter, we seek to offer some description of engineering work by looking in detail at a specific manufacturing industry—firms that supply automakers—to gain insight into how engineers create innovation. Autos account for 5% of US GDP and in 2011, 70% of auto suppliers contributed design effort, a task typically performed by engineers, making the auto supply chain an important context in which to study engineering and innovation.

Some highlights from our original survey data include a wide range in terms of size and strategies of supply chain companies; a majority was small- to medium-sized, often family-owned. We observed barriers to patenting for manufacturing firms developing process rather than product innovations. And interviews revealed the importance of customers for the innovative efforts of supplier firms. Certain Japanese customers were preferred because they shared expertise and helped suppliers improve, while other, American, customers were viewed as having unreasonable demands for regular, incremental price reductions and did not offer technical or organizational support.

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This chapter first appeared as NBER working paper w22552, What Goes on Under the Hood? How Engineers Innovate in the Automotive Supply Chain, Susan Helper, Jennifer Kuan
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