The example of Sheffield could offer an example to Midlands manufacturers struggling to cope with the fallout from the collapse of MG Rover, it is claimed.
The Yorkshire city, once the world's centre of steel production, has emerged from a period of chronic decline which has seen more than 24,000 jobs lost.
Although the steel industry has survived in Sheffield, it is now a much leaner and more efficient industry, focusing on specialist steels for high performance applications, said Phil Roberts, chief executive of inward investment organisation Sheffield First.
Mr Roberts said Sheffield's expertise in metals and manufacturing has now been applied in other specialist areas, with the city being home to the UK's largest cluster of orthopaedic and medical technology companies.
A strong base of research & development organisations have developed in and around Sheffield including Castings Technology International, TWI (formerly the Welding Institute), NAMTEC (National Metals Technology Centre), British Glass Technology Services and the main R&D centre for Corus (formerly British Steel).
Sheffield has harnessed its knowledge-based assets and research expertise in both of its two Universities, and in the private sector, to position itself as a centre of excellence in materials and manufacturing technology, particularly for the healthcare, automotive and aerospace industries.
Mr Roberts said: "Sheffield offers a good case study, it has gone through three stages of redevelopment since the closure of the steel works, and is now starting to recover.
"The first stage involved redeveloping the whole physical infrastructure. Many of the old steel plants were huge, physically imposing sites which have to be redeveloped into something else.
"Then the city had to move to a knowledge-based economy. Many of our manufacturers have done that.
"Swann Morton for example had a reputation for excellence in cutlery, but now they have diversified and the company now makes 50 per cent of the world's scalpels.
"It specialises in surgical instruments, which are a kind of cutlery with added value."
Another company which has built on its steel producing excellence was HD Sports, which makes specialised blades for ice skates.
Mr Roberts said: "These are not bog standard ice skates, but were were worn by all the gold, silver and bronze medal winners at the last Olympics, not only in figure skating but ice hockey as well. It is all about adding value and making things better. Our steel companies make specialised metals and products, which are used in the car, aerospace and medical industries.
"If you are making normal hammers or screw drivers, it is going to be difficult to compete with China and India, but by diversifying and going for knowledge and added value companies stand a much better chance."