domestic manufacturers. This has been the result of a 30-year trend of outsourcing by large automotive, aerospace, and heavy equipment manufacturers. Since the early 1980s, manufacturing employment has become increasingly concentrated in smaller plants and decreasingly concentrated in larger companies. The number of manufacturing plants with fewer than 500 employees in the United States fell in 2000 and 2001 for the first time since 1978.¹⁴ The influence of this small-manufacturer segment is exemplified by the fact that in large manufacturing plants that have experimented with a variety of ways to empower employees, it is routine today for small work units to operate independently within a larger plant. In other words, large firms are trying to emulate the productivity factors of small firms, which are perceived as being better.

Small and medium-sized manufacturers face specific issues, including a small client base and a greater dependence on revenue from each client; small management teams; limited access to capital for improvements; and difficulties in providing service overseas. In order for these enterprises to prosper, increased integration of their supply chain is important, as is easier access to technology and capital. The manufacturing sector needs to find a way to modernize and strengthen small and medium-sized manufacturing enterprises. Support from federal and state governments can be very effective, and the committee noted broad support for the Manufacturing Extension Partnership program. It is key that this type of support be sustained and that it be coordinated among the stakeholders: employers, educators, students, and government leaders.

The bottom line for many manufacturers today is risk. Decisions on manufacturing domestically or overseas, to adopt innovations or evolutionary improvements, or to hire and train new workers or to invest in more productive technology are all based on the perception or measurement of risk. In many cases, the United States does not offer a least-risk environment to start or expand a manufacturing enterprise.