Understanding the Defense Conversion Dilemma

Abstract

Two major sectors of the economy—commercial and defense—are facing extensive change and are undergoing considerable downsizing. The defense sector was forced in recent years to adjust to a post-Cold War era and to find commercial uses for many of its military-related technologies, and the commercial industry is challenged by increased competition, higher productivity goals, and higher demand for quality products and shorter development cycles. Under these circumstances, conversion from defense into commercial activity became inevitable, and joint ventures of defense and commercial companies are common. Yet, many conversion attempts are unsuccessful, with failures attributed to differences in culture, practices, and experience of the two sectors. The purpose of this article is to discuss the defense conversion problem faced by defense contractors for a better understanding of the difficulties associated with conversion efforts. We start by discussing briefly the situation, policy, and environment of the American industrial base—government, defense. We then suggest a specific conceptual framework for analyzing the conversion dilemma. Such a framework may help defense companies during the decision-making process while considering transitions into civilian markets and serve as a basis for additional research on the defense conversion dilemma.