With GE on its way, Mass. economy comes full circle
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After a long erosion of its industrial base, Massachusetts last week landed one of the world's biggest industrial companies.
The decision of General Electric Co. to move its headquarters to Boston highlights how the local economy has come full circle, through decades of invention and reinvention, to be a leader in the tech products and services every US industrial company needs to compete globally.
In choosing Boston, General Electric made clear that it desperately wants and needs to tap into the region's diverse tech ecosystem — buttressed by research institutions such as MIT and Harvard University. The goal: to transform GE into an "industrial Internet" company making transportation, health care, and energy products with sophisticated digital intelligence and communications systems.
"Massachusetts has found its next act," said Fred Breimyer, a local economist and former president of the New England Economic Partnership, a nonprofit research group. "GE's decision to relocate here is a tech story. But it's also a manufacturing story. It's a life-science story. It's a higher-education story. It's a combination of a lot of stories that are interwoven together in Boston."
The region's manufacturing and technology sectors have long run on similar courses. In the early years of the 20th century, General Electric itself played a major role in shaping the state's economy, after Thomson-Houston Co. of Lynn and the Edison Electric Co. merged to form General Electric in the late 1800s. Though headquartered in New York, the young GE maintained a large presence in Massachusetts, where it produced what were then cutting-edge products such as arc lighting and electric-powered motors.
Other technology-oriented manufacturers emerged in Massachusetts during the early decades of the last century, such as Raytheon Co., founded in 1922 in Cambridge as American Appliance Co. After abandoning making refrigerators, Raytheon shifted to the emerging fields of radio and later radar systems during World War II.
Today, Lexington-based Raytheon is a defense industry powerhouse, developing products from Patriot missiles to GPS guidance systems.
Andre Mayer, former research director at Associated Industries of Massachusetts, a business group founded in 1915 to represent major manufacturers, said industrials like GE and Raytheon have always relied upon the state's research institutions and skilled workforce to gain advantages over rivals.
"We've long had sophisticated manufacturers making sophisticated products — or at least sophisticated products at their time," he said.
After World War II, in the early years of the Cold War, an entirely new sector emerged in Massachusetts, once again taking advantage of the talent-rich workforce and research institutions: computers.
Companies such as Wang Laboratories, founded in 1951, and Digital Equipment Corp., founded in 1957, became huge computer manufacturers and dominated the minicomputer sector for decades. But it wasn't all smooth sailing for the state's manufacturing and high-tech industries.
At its peak in the 1960s, manufacturing employed about 650,000 workers; today, 250,000 work in the sector, according to government statistics. Textile mills, automakers, and shoe companies closed plants and moved operations to lower-cost states and countries.
The state's computer industry took major hits in the late 1980s and early 1990s, when Digital, Wang, and other minicomputer makers failed to see that the future lay with personal computers. For years after the demise of these companies, Boston bemoaned the lack of high-profile consumer technology businesses such as the Silicon Valley titans Apple Inc., Google (whose parent company is now Alphabet Inc.), and Facebook Inc.
In focusing on Silicon Valley, economic historians say, many people failed to appreciate the quiet transformation of the local technology sector into a lower-profile but no less sophisticated center of enterprise software for corporate systems, and other non-flashy business services products.
Route 128, once dubbed America's Technology Highway, is still home to an unparalleled cluster of companies that create software to help manufacturers conceive, design, make, and improve products. Virtually any product a consumer touches — from pots and pans to automobiles — was probably created with software developed in Greater Boston.
In manufacturing, there's also been a profound but largely underappreciated shift in Massachusetts. Today, the strongest and fastest-growing manufacturing category is computer equipment and electronics, including semiconductors, integrated circuits, telecommunications equipment, audio and video products, and other high-end items.
The life-sciences sector also has increased production of drug products, medical devices, and instruments in Massachusetts.
Manufacturing workers in Massachusetts are more likely to have completed college and received graduate degrees than in any other state, said Barry Bluestone, director of the Dukakis Center for Urban and Regional Policy at Northeastern University. Local factories that pumped out plastic pink flamingos for American lawns in the 1960s now produce sophisticated polymers used in medical devices, prosthetics, and other health care products, Bluestone said.
"This is where you want to be if you want to be on the cutting edge of technology," Bluestone said.
Even before it chose Boston for its headquarters, GE had planted its flag in the Massachusetts technology sector. GE launched its life sciences headquarters in Marlborough last year, focused on drug manufacturing. GE is also bringing Current, a new business focused on energy efficiency equipment, to Boston later this year.
Michael Tamasi, president of the Avon manufacturer AccuRounds Inc., said GE's moves confirm the manufacturing renaissance here — and the industry's place in the innovation economy.
When his father started the company in the 1970s, Tamasi said, much of the equipment on the factory floor was mechanical. Today, wireless technologies guide machinery that allows AccuRounds to make precision parts to the tightest tolerances, whether for the production of flu vaccines or the construction of aircraft wings.
"It's sophisticated, high-end programming," he said. "It's manufacturing engineering."
Business leaders hope that GE's presence in Boston will further merge the state's technology and manufacturing sectors. A company like GE has the resources to help innovative companies bring cutting-edge products to market by investing in promising startups and technologies, said Peter Russo, a program manager for the Massachusetts Manufacturing Extension Partnership, a Worcester nonprofit that supports local manufacturers.
Breimyer, the economist, said the opportunity to be a central player in the state's diverse tech sectors may be exactly what GE is after.
"GE's move here is an affirmation of what's already been done, the transformation to [a] different type of economy," Breimyer said. "GE is putting its faith in the technologies and the institutions here."