Column: Study shows that Georgia manufacturers don’t use R&D credits
By Maria Saporta
Published in the Atlanta Business Chronicle on October 19, 2012
Georgia manufacturers don’t place a high premium on innovation and they don’t take advantage of research and development tax credits to invest in new technology.
Those are some of the results in the 2012 Georgia Manufacturing Survey that was released Oct. 16 at the Next Generation Manufacturing conference held at Georgia Tech’s Academy of Medicine.
“Less than 10 percent [of the companies surveyed] said innovation was most important,” said Adam Beckerman, a partner with the Habif, Arogeti & Wynne firm that conducted the survey along with Georgia Tech and Kennesaw State University.
The report surveyed 528 manufacturers with 10 or more employees. The Georgia Manufacturing Survey began in 1994, and it has been conducted every two or three years.
When asked about their strategic preferences, more than half of Georgia manufacturers said it was quality of service, with 17 percent saying it was offering products at a lower cost.
Less than 10 percent mentioned innovation and new technology.
The firms that did make innovation a priority, however, had higher profits than the companies that did not.
“Innovation is a crucial strategy for manufacturing companies,” Beckerman told the gathering of about 200 manufacturers. “Innovation does require investment. But only 4 percent of Georgia manufacturers use public loans or grants; only 3 percent received private equity support; and only 1 percent used the Small Business Innovation Research program.”
But most surprising was the low percentage of companies that took advantage of innovation tax credits.
“Georgia has one of the most lucrative R&D tax credits in the country,” Beckerman said. “Yet only 18 percent said they use R&D tax credits.”
A few other highlights of the study included:
82 percent of Georgia manufacturers experienced positive profitability from 2009 to 2011 with the median being6 percent.
Half of Georgia manufacturers had export sales, and 23 percent of the manufacturers increased their export sales in 2011 compared to 2009.
24 percent of the respondents reported problems finding technically skilled workers; and 16 percent reported problems finding workers with basic skills.
More than 75 percent of Georgia manufacturers have set goals to improve the sustainability of their business. The most common goal was to eliminate waste going to landfills (about 70 percent) and the least common goals were to reduce energy use and to use renewable energy.
“A manufacturing renaissance is occurring in the United States,” Beckerman said, adding that many companies are bringing their manufacturing operations back home. That’s because of “rising labor costs in Asia.”
He also said that manufacturers that invest in innovation are more likely to choose in-sourcing rather than outsourcing.
Also preaching the merits of innovation in manufacturing was Georgia Tech President Bud Peterson.
“Manufacturing accounts for more than 90 percent of our exports,” said Peterson, who added that it’s an exciting time for both Georgia Tech and manufacturers because they are helping create “an innovation ecosystem.”
For people who want an inside look at “Navigating Financially in an Uncertain World,” Ed Mendel is making a return appearance at the Marcus Jewish Community Center of Atlanta on the evening of Oct. 24.
Mendel, who is a minority owner of the Atlanta Falcons, is a founder of one of the largest institutional investment research firms in the U.S. In advance of his talk, Mendel shared some nougats of advice that he will share on Oct. 24 on how people can protect their assets.
“You are going to have to figure out how to navigate this debt bomb,” Mendel said about the nation’s growing debt and its exposure and liabilities in derivatives, Medicare, Medicaid, Social Security and pensions. “You can’t keep doing what we’ve been doing without unintended consequences.”
Other topics that will be included in the presentation are the critical significance of diversifying investments through multiple vendors; why doing nothing could be the most dangerous thing financially; and how to invest in assets that offer a store of value.
Mendel’s investment in the Atlanta Falcons by buying a minority share from owner Arthur Blank was one way he diversified his investments and a way to have stored value.
“When the opportunity came up, I didn’t hesitate,” Mendel said. “It’s an ultimate toy. And Arthur promised me he would make it fun.”
At its annual ecoBeneféte awards dinner Oct. 11, the Georgia Conservancy gave its highest award to Will Harris III of White Oak Pastures.
The Distinguished Conservationist Award was given to Harris for his work in sustainable, humane and organic farming. White Oak Pastures was founded in Bluffton in 1866 by Harris’ great-grandfather, James Edward Harris.
Under the younger Harris’ leadership, White Oak has returned to its roots as an artisan farm focusing on animal welfare, environmental sustainability and local food production.
The dinner, which was held at the Foundry at Puritan Mill, also featured a “Farm to City” menu with locally sourced food provided by Steven Satterfield of Miller Union, and Cathy Conway and Jenn Robbins of Avalon Catering.