The Role of Regional Networks in Twenty-First-Century Industrial Policy

A new architecture for American industrial policy is taking shape, and it is being built from the ground up. The old model treated research and development (R&D) as a national objective to be managed from Washington. Over the last 15 years, U.S. innovation policy has increasingly recognized innovation as inherently regional, rooted in the universities, national laboratories, firms, factories, and skilled workforces that cluster in particular places. Rather than treating research, commercialization, and manufacturing as separate policy domains, this emerging model seeks to connect them into a more integrated regional innovation system, allowing firms to move more seamlessly from discovery to commercialization, pilot production, and ultimately large-scale manufacturing. Michael Kratsios’s July 2026 report to President Trump, Science: A New Golden Age, reflects the full expression of this organizing framework for the U.S. science and technology enterprise. It is the first comprehensive rethinking of the U.S. science and technology enterprise by the White House Office of Science and Technology Policy (OSTP) in more than 80 years.

The report calls on the government to “expand regional innovation hubs, manufacturing institutes, and defense industrial base centers to anchor regional innovation ecosystems.” It urges federal agencies to “support state-led experimentation, partner with jurisdictions that move the fastest, and let localities compete to support regional innovation,” so that “innovation strategies that work spread across the nation, advancing science and technology in every county and state.” This is not a marginal recommendation. It reflects a deliberate strategic wager that America’s next era of technological leadership will be won or lost in its regions.

A New Breed of Public-Private Partnerships

This vision depends on a new generation of public-private partnerships that connect regional assets within a coherent federal framework. The Regional Technology and Innovation Hubs (Tech Hubs) program, led by the Economic Development Administration (EDA), is one example. Authorized under the CHIPS and Science Act of 2022, it designates cross-sector regional consortia—spanning industry, universities, and state and local government—and funds them to accelerate the commercialization, manufacturing, and deployment of critical technologies. In July 2026 alone, the program distributed $169 million across six hubs, including awards to the Kansas City BioHub and the Bloch Quantum Tech Hub spanning Illinois, Indiana, and Wisconsin. The program’s growing bipartisan support is a sign of its traction.

The National Science Foundation’s Regional Innovation Engines program complements this effort. Rather than funding individual principal investigators, it funds CEO-led regional coalitions that translate use-inspired research into commercial technology platforms. Each engine can receive up to $160 million over a decade. The program’s second cohort, announced in July 2026, extended awards to 12 additional teams across 20 states. Its first cohort turned $135 million in federal seed funding into more than $2 billion in matching commitments.

The Manufacturing USA network, driven by the National Institute of Standards and Technology (NIST), provides the manufacturing scale-up piece these research-oriented programs lack. Its institutes include efforts such as AIM Photonics in Albany and the Advanced Robotics for Manufacturing (ARM) Institute in Pittsburgh. Each is a public-private partnership built around a distinct technology, and each helps de-risk the transition from pilot production to full commercial-scale manufacturing.

A related instrument is the Hollings Manufacturing Extension Partnership (MEP), NIST’s nationwide network for helping small and medium-sized manufacturers adopt new technologies, improve productivity, and participate in more advanced supply chains. In the regional architecture described here, MEP plays a distinct role: It connects national technology priorities to the existing base of local manufacturers that must ultimately absorb, adapt, and scale new production methods. That role would be strengthened by tighter integration with Manufacturing USA—institutes could identify promising technologies, develop shared testbeds and workforce curricula, and refer ready-to-adopt tools to MEP centers, while MEP centers could bring small and medium-sized firms into institute-led pilot projects and supplier networks. NIST’s planned MEP Technology Accelerator pilot points in this direction by using MEP authority to accelerate adoption in strategically important areas, including additive manufacturing for aerospace components and the domestic critical minerals supply chain.

Finally, the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs provide the earliest, most distributed layer of regional technology formation. Together they inject roughly $4 billion annually into small technology-focused firms across all 50 states.

Together, these and other programs form a layered, though still incomplete, federal architecture. The SBIR and STTR programs seed firm-level innovation, often drawn from university research. The NSF’s Regional Innovation Engines and the EDA’s Tech Hubs build regional coalitions and commercialization capacity, again including small firms and university researchers, while NIST’s Manufacturing USA institutes de-risk scale-up and advance manufacturing readiness. However, these efforts face two central policy challenges: (1) scale, especially in funding and regional outreach, and (2) making these programs, along with complementary state and local initiatives, work together rather than in isolation. The ideal environment would allow a firm to move more seamlessly from an SBIR award to a Regional Innovation Engine–supported research partnership, to a Manufacturing USA pilot line, and ultimately to Tech Hub–backed commercial-scale production, all within the same regional ecosystem. Federal programs are only one part of this emerging architecture; many states have independently developed innovation strategies and regional partnerships that build on local comparative advantages, underscoring that successful ecosystems are coproduced by federal, state, and regional actors.

This integration matters because a persistent gap separates early-stage research from commercial deployment. Grant programs can fund research. Private capital, by contrast, will only finance a technology once its market risk has been substantially reduced. A firm can secure multiple SBIR grants to prove a concept and produce a prototype but still fail years later for want of a pilot manufacturing line or a first anchor customer. By sequencing SBIR and STTR programs, Regional Innovation Engines, Manufacturing USA, and Tech Hubs so that each program picks up where the last leaves off, the federal government is attempting to build bridges across that gap, rather than simply funding more research at its edge and hoping it will be commercialized.

Even so, this network remains incomplete. Funding for the SBIR and STTR programs and Regional Innovation Engines has expanded the pipeline of promising early-stage research, but far less attention has gone to the harder challenges of acquiring the resulting prototypes and scaling promising technologies into market-ready products and processes. Manufacturing USA and the Tech Hubs program are early attempts to close this scale-up gap, but their combined funding remains inadequate relative to the challenges of product development. Too many promising technologies still stall between prototype and commercial production for want of pilot lines, patient capital, and anchor customers or early procurement. For example, quantum technologies have made significant technical advances, but many firms face a commercialization gap as they move from laboratory prototypes to manufacturable, reliable systems. Limited pilot manufacturing infrastructure and a small base of early customers have slowed deployment. Closing this gap deserves far more sustained policy attention going forward.

The Political and Economic Significance of the Innovation-Manufacturing Nexus

Building regionally anchored architectures that better connect research, commercialization, workforce development, and manufacturing will require more than a programmatic adjustment. It will require rebalancinh the U.S. innovation system from an R&D-focused model toward one that places the manufacturing of innovative products at its center. That rebalancing is needed not least to generate a higher and more visible return on the nation’s R&D investments, but it is also fundamental to the modern economy. Innovation and production are not separate activities that can be split apart by geography without cost—they reinforce each other. Firms that manufacture close to where they conduct research benefit from tight feedback loops between engineers and production lines. Design flaws get caught early. Process improvements accumulate through hands-on learning. As a result, these firms can develop the next generation of products faster and more cheaply than firms that must coordinate across distant, disconnected sites—these realities are the basis for innovation clusters.

When manufacturing moves offshore, these feedback loops erode, and firms lose the benefits of proximity to the labor, suppliers, and tacit, hard-to-codify knowledge that generates follow-on innovation. A country’s capacity to design and produce new technology can wither even when its underlying science remains strong. This is why an innovation strategy centered narrowly on funding research, without a parallel commitment to sustaining domestic manufacturing capacity, is incomplete and ultimately a threat to the nation’s security.

This is because the stakes of this erosion are not merely commercial. The same design capacity and tacit knowledge that atrophy when manufacturing moves offshore are exactly what a nation needs to produce advanced semiconductors, batteries, and precision components at scale. These capabilities underpin the defense industrial base, and they cannot be reliably secured in a crisis if they no longer exist at home. Seen this way, the economic and geopolitical arguments for rebuilding domestic manufacturing are one and the same—a reality made clear by the current balance of global manufacturing power.

China places manufacturing at the core of its own long-term innovation strategy, and it shows: China alone accounted for 29 percent of global manufacturing output in 2023, nearly 12 percentage points ahead of the United States. East Asia as a whole—including China, Japan, South Korea, and Taiwan—generated three-quarters of the manufacturing value added produced across Asia and Oceania, a region that itself contributes more than half of global manufacturing value added. Unlike the United States’ historically fragmented approach, China has pursued a more integrated, full-cycle innovation strategy that links R&D, manufacturing, commercialization, workforce development, and regional development. Rebuilding a domestic manufacturing base is therefore inseparable from the broader contest over technological leadership as well as the economic and national security advantages that leadership confers.

Winning that contest requires more than reshoring factories. To the extent that public investment is part of the strategy, it also requires sustaining the domestic political will and commitment to policies that support reindustrialization over the multidecade timelines that reindustrialization demands. That is why this regional approach also serves a second purpose: reconnecting science and technology to American economic growth and employment. Americans need to see tangible returns on public investment in science and technology—in the form of regional development and jobs—rather than experiencing federal R&D spending as an abstraction concentrated in a handful of coastal metropolitan areas. A strategy that is visible and beneficial in Ohio, Arizona, and Kansas, not only in Cambridge or Palo Alto, is far more likely to command the sustained congressional funding that a generational competition with China will require. For that same reason, it is both true and necessary to underscore the national security consequences of lagging industrial production, particularly in the face of mercantile trade practices by foreign competitors.

Building on the Concept of Regional Innovation Ecosystems

This innovation systems framework builds on a long-standing body of economics research on regionally focused technology ecosystems, including work examining the importance of regionally rooted tech clusters. That scholarship describes a polycentric innovation system: one built not around a single national hub, but around interconnected networks of local innovation nodes, each contributing distinct capabilities to the whole. While scholars continue to debate the extent to which technology clusters can be deliberately designed rather than emerging organically, this framework emphasizes strengthening and connecting existing regional assets. In this model, the federal government’s job is not to dictate outcomes from the center. It is to seed and connect assets across regional technology ecosystems—through shared standards, sustained matching funds, and cross-regional partnerships—so that locally generated innovations can scale nationally.

Such a system also offers real advantages in resilience and redundancy. Because capacity is spread across many regional nodes rather than concentrated in one place, a single shock—economic, natural, or geopolitical—is less likely to disrupt the nation’s capacity to innovate and produce. The Covid-19 pandemic made that risk concrete rather than merely theoretical.

This is precisely the function performed by the architecture described above—the interconnection across Tech Hubs, Regional Innovation Engines, Manufacturing USA, MEP, and SBIR and STTR programs. Each program supplies connective tissue to link otherwise isolated regional nodes into a genuinely national system. And working through many coordinated centers, rather than one commanding center, is not merely a practical design choice. It reflects a much older strain of American political thought about how power and initiative ought to be distributed in the first place.

Regional Networks and the Next Phase of U.S. Industrial Policy

An evolving architecture for American industrial policy is taking shape, building on long-standing strengths while rebalancing the U.S. innovation system. The twentieth-century model expanded federal capacity dramatically, especially through the New Deal and the postwar research enterprise. It also relied on a broad mix of tools—mission agencies, defense and space procurement, agricultural programs, federal grants, standards, and technical assistance—not simply on centralized basic research funding. What distinguishes the current moment is the renewed effort to connect national technology priorities to the places where innovation, production, workforce development, and supply chain capabilities actually come together.

The programs and principles outlined in this essay are not a finished architecture. They are a work in progress, and they will require sustained congressional funding, better interagency coordination, and patient regional institution building—including continued attention to the scale-up gap between prototype and production—to fully realize their promise. They will likewise require mechanisms for rigorous evaluation, allowing policymakers to identify which regional strategies succeed, which fall short, and how programs should adapt over time. Achieving this vision will also require stronger alignment among federal agencies and state, regional, university, and industry partners, reducing the fragmentation that often characterizes place-based initiatives. If they succeed, the payoff will be a more resilient, nationally distributed manufacturing and innovation base: one better able to convert American science into production, close critical industrial gaps, and secure the economic and national security advantages that come with sustained U.S. technological leadership.

Sujai Shivakumar is the director and senior fellow of Renewing American Innovation at the Center for Strategic and International Studies (CSIS) in Washington, D.C.