Few economic issues have captured as much attention in recent years as the apparent decline in U.S. industrial competitiveness. Numerous studies prepared by various national commissions, policy organizations, and academics have documented industrial decline, uncovering its causes, and proposing remedies for U.S. industry. Most of the research has identified manufacturing as the industrial sector that has experienced the most serious erosion of cost and quality superiority.

With a view toward building a stronger basis for such public policy decisions, researchers at the Center for Agricultural and Rural Development set out to study some essential questions about the efficiency of manufacturing. Using the machine tool industry from 1972 to 1987 as an example, the study, which is summarized here, examines determinants of manufacturing efficiency and plant survival, and the effectiveness of public policy. Manufacturing or industrial extension programs, which provide a variety of technical and managerial assistance, were chosen for policy evaluation. The study suggests public and private responses to the productivity crisis that might improve the competitiveness of manufacturing for industries experiencing problems similar to those observed in the machine tool industry.