The Ralph and Goldy Lewis Center for Regional Policy Studies

A variety of governmental and non-governmental economic-development agencies are promoting "flexible manufacturing networks" (FMNs) as a strategy to increase the competitiveness of manufacturing industries in the United States. This form of industrial organization comprises small and medium-sized enterprises who cooperate with one another in informal and fluid production networks to quickly respond to changing market opportunities. The assumption behind these efforts is that networks can help industries and regions embark on a high road to development in which they would compete by increasing quality and innovation rather than by cutting costs and lowering wages. Proponents thus tend to equate the increased competitiveness resulting from network formation with the retention and improvement of jobs. Others argue that such an assumption is a leap of faith, based on a false association of a particular form of industrial organization with a particular type of industrial relations. They also contend that flexible production systems can be combined with any number of arrangements governing industrial relations, some that benefit workers and some that hurt them. Clearer analysis on this issue is crucial, and this working paper reviews the theoretical and empirical bases of these assumptions and specifically addresses the distributive impacts of FMNs.