The Hollings Manufacturing Extension Partnership (MEP), a program of the National Institute of Standards and Technology (NIST), is a nationwide network of manufacturing extension centers that provide services to small and mid-sized manufacturers to increase their competitiveness and productivity. Since it was established by the Omnibus Trade and Competitiveness Act of 1988, the MEP has worked with manufacturers to provide cost-effective expertise and assistance to improve their manufacturing processes, to provide workforce training, and to implement new technologies. The MEP also focuses on supply chains, as well as providing growth and innovation services to firms. It serves approximately 7,000 to 8,000 client firms each year.
Many stakeholders view the primary mission of MEP as improving the long-term viability of the U.S. manufacturing industry in the increasingly competitive global business environment. To meet this mission, MEP must demonstrate persistent, long-term improvement in client performance. In addition, the U.S. Office of Management and Budget (OMB) has asked federal programs to make decisions regarding assessments of program performance based on evidence. Consequently, in 2011, the U.S. Department of Commerce awarded Greenfield Advisors and the Georgia Institute of Technology $249,000 to evaluate the effects of the MEP program. This award allowed us to conduct additional research following up on previous research done by SRI and Georgia Tech back in the late 2000s.
Although I was the principal investigator, this was a very collaborative project. Greenfield Advisors and the Georgia Institute of Technology assembled a blue-ribbon Technical Advisory Group (TAG) to consult on our research methodologies. Members of the TAG included former and current chief economists within the U.S. Department of Commerce as well as other well-known economists at the U.S. Census Bureau and the University of Texas at Austin.
Our research evaluated the economic performance and survival of U.S. manufacturing firms, comparing the outcomes of MEP clients (those firms that received some kind of service from a MEP center) to non-clients, controlling for other factors. We focused on establishments that received MEP services between 1997 and 2007. We estimated the effect of different levels and types of MEP services on output and productivity growth over that period. In the proposal, we said that the novelty of our approach was going to be the use of different econometric methods and different instrumental variables to control for selection bias in our models estimating labor productivity. Once we got into the data, that challenge could not be completely overcome. We also looked at the characteristics of establishments that survived longer (i.e., stayed in business through our period of observation).
To start, we merged data from the MEP’s program records with administrative records from the Census of Manufactures and other Census databases over the periods 1997–2002 and 2002–2007. We then compared the outcomes of MEP client and non-client manufacturing establishments. We considered several measures of performance, including (1) change in value-added per employee (a measure of productivity), (2) change in sales per worker, (3) change in employment, and (4) establishment survival. This approach updated and expanded upon earlier studies comparing matched MEP client and non-client performance over periods ending in 1992 and 2002.
Our results generally showed that MEP services had significant positive effects on productivity and sales per worker for the 2002–2007 period, with some exceptions based on employment size, industry, and type of service provided. Small manufacturing firms (those with 1–19 employees) have higher levels of labor productivity growth after receiving MEP services. We also observed significant productivity differences associated with MEP services by broad sector, with higher impacts over the 2002–2007 period in the durable goods manufacturing sector. Durable goods are those that are expected to last at least 3 years, such as bricks, refrigerators, and cars. Our study also found that establishments receiving MEP assistance are more likely to survive than those that do not receive MEP assistance.
Detailed findings of the study, as well as caveats and limitations, are discussed in our Center for Economic Studies (CES) research paper, “Evaluating the Long-Term Effect of NIST MEP Services on Establishment Performance.”