Defense Firms Research Articles

A characterization of the financial condition of the United States' aerospace-defense industrial base

Over the past several years, the United States' Department of Defense acquisition environment has changed considerably as new policies and procedures have been enacted, budgets reduced, military hardware requirements changed, etc. Using data envelopment analysis, this study assesses the financial condition of the aerospace-defense industrial base from 1978 to 1992 in comparison to the Standard & Poors (S&P) 500. The results of this research indicate that the S&P 500 firms were in better financial condition relative to defense firms over the entire 15-year period of the study. Furthermore, the financial condition of aerospace-defense firms has not deteriorated relative to S&P 500 firms.

Assessing present practices for defense conversion in small to medium-sized firms

This study found that in spite of increased calls for conversion from defense to commercial-based capabilities to enhance survival and growth opportunities, reduced dependency on Department of Defense (DOD) sales was negatively associated with sales growth for a sample of 90 Ohio-based small to medium-sized defense firms from 1990 to 1993. This implies that rather than converting to commercial production, most smaller defense firms are shrinking along with DOD procurement budgets. This finding is not surprising, since the structural characteristics of the defense industry make DOD-dependent firms' transitioning to commercial business extremely difficult if not impossible. The paper concludes by providing several recommendations for managers and policy makers to help these firms make the transition to a civilian economy.

Economic Incentives and the Defense Procurement Process

This paper describes some of the insights that the economic theory of incentives can contribute to defense procurement policy analysis. It describes the underlying incentive problems that shape the defense procurement problem, the nature of current institutions and how they affect actors’ behavior, and possible directions for improving the procurement process suggested by viewing it as a solution to a complex set of incentive problems. Incentive problems between government and defense firms and incentive problems within government are both considered.

On improving the efficiency of the defence innovation process: an empirical framework

This empirical study examines the innovation process within the defence environment from two perspectives, namely the users' (the military) and the producers' (industry). Unlike commercial innovations, in defence innovations the users play a more direct role and consequently have more control over the process. The premise of the study is that the lack of cooperation and conflict situations between users and producers have had devastating effects on the innovation process in terms of time and cost. Based on the data collected from 85 executives from 75 Canadian defence firms, ten domains of interaction between the two players are identified. The possible issues affecting innovation time and cost in each of these domains have been highlighted, and recommendations have been made on how to resolve these issues.

DEFENCE SECTOR PROCUREMENT AND THE SMALL, MILITARY‐INDUSTRIAL FIRM

The proper matching of industry structure to strategy is expected to have a positive impact upon organisational performance. This relationship has not been fully examined in the defence industry. The central aim of this paper is to link the competitive performance of small, high technology defence firms to their ability to adapt to industry structure changes. With this in mind a study was conducted to extend Porter's (1980) framework of the strategic management of industry structural change. The study draws upon the experiences of 40 small, high technology defence firms in the UK. Firms in the sample range from 5 to 200 employees, and £50,000 to £10m sales turnover. The study broadens the findings of exploratory research undertaken in the buying department of two large defence firms. A questionnaire was designed to identify macro level phenomena and detail hypotheses generated by the case studies. The empirical analysis of the creation and sustaining of competitive advantages will focus on strategic determinants, and inter‐organisational variables that influence the performance of small firms in tendering for defence sub‐contracts.

Toward a strategic-repositioning model for defense and aerospace contractors

This paper discusses progress in developing a strategic-positioning model for defense and aerospace contractors in the post-Cold War era. Going beyond traditional concepts of technology transfer, defense conversion, and corporate diversification, strategic repositioning is concerned with the entire set of organizational transformations required to successfully focus the firm's core competencies onto other economic sectors. It is a process of looking at all of the firm's capabilities, resources, and aspirations in a completely new light. Construction of the strategic-positioning model, now in progress, involves three stages: 1) conceptualizing the process, 2) formulating a theory of strategic repositioning through exploratory discussions with defense contractors at various stages of the process, and 3) constructing a strategic- repositioning decision-support tool for defense firms undertaking the process. This paper reports the results of the second stage, the exploratory discussions. Surprisingly, technology was of the least concern to the contractors. Rather than the technology itself, contractors were concerned about the different expectations of non-DOD markets regarding such ancillary technology issues as quality, reliability, maintainability, and the degree of technological standardization. Of greatest concern was the nature of the organization, particularly the contractor's corporate culture and how well it would fit with non- DOD markets.

Structural barriers to converting defense firms

Structural barriers to converting defense firms

Corporate Strategy, Corporate Culture and Conversion; Adjustment in the Defence Industry

The recent decline in military demand has prompted calls for government aid to help the arms manufacturers convert to civil production. The authors examine the shock that UK defence firms faced, the constraints their defence culture imposed and how they responded. They conclude that while the market solution, closure of defence plants and redundancy, may appear wasteful, in the longer run it is likely to be more productive than trying to convert defence plants.

THE FUTURE OF THE U.S. DEFENSE INDUSTRY

Defense contractors in the United States face a painful choice between downsizing or investing in new high-risk commercial ventures. Past experience reveals numerous failed efforts to penetrate commercial markets and few, if any, successes. The capabilities required to succeed in civilian business are fundamentally different from those needed to design and produce weapon systems. Defense firms and defense divisions of diversified corporations lack adequate knowledge of commercial products, production methods, advertising and distribution, financial approaches, and customer demand. Given the outlook for a sustained decline in U.S. military spending, the author advises companies catering to military markets to cut their costs by reducing excess capacity. Smaller but more competitive positions can be achieved through restructuring, mergers, sales of assets, and, if necessary, closing down unneeded facilities. Firms that ignore the pleas for “conversion” and do not dissipate their assets in civilian markets alien to them stand the best chance of surviving during a period of reduced military demand.

Technology Strategy in a Changing Aerospace/Defense Environment

ABSTRACTThis article addresses the changing nature of the business conducted in the aerospace/defense industry. The challenges of efficiently using technology and balancing technological advances with cost-competitiveness are discussed in relation to recent global political and cultural events. The need for a workable technology planning approach is discussed along with specific activities that aerospace defense firms can take in developing their new approach to conducting business.

Defense: suppliers are challenged to downsize gracefully as they seek to diversify

Transitional steps being considered by US industry in the face of reduced military spending are described. Virtually all major defense firms have begun laying off workers or have announced plans to do so, and many defense companies plan to diversity into, or expand their share of, nondefense work and contracting. The problems encountered by the defense industry when it attempted to diversify after the Vietnam War are examined, and current diversification plans and efforts are discussed.< <ETX xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">&gt;</ETX>

New Weapons, Old Politics: America's Military Procurement Muddle

Americans spend more than $100 billion a year to buy weapons, but no one likes the process that brings these weapons into existence. The problem, McNaugher shows, is that the technical needs of engineers and military planners clash sharply with the political demands of Congress. McNaugher examines weapons procurement since World War II and shows how repeated efforts to improve weapons acquisition have instead increased the harmful intrusion of political pressures into that technical development and procurement process. Today's weapons are more complicated than their predecessors. So are the nation's military forces. The design of new systems and their integration into the force structure demand more care, time, and flexibility. Yet time and flexibility are precisely what political pressures remove from the acquisitions process. In a series of case studies and conceptual discussions, McNaugher tackles concerns at the heart of the debate about acquisition--the slow and heavily bureaucratic approach to development, the preference for ultimate weapons over well-organized and trained forces, and the counterproductive incentives facing the nations defense firms. He calls for changes that run against the current fashion--less centralization or procurement, less haste in developing new weapons, and greater use of competition as a means of removing the development process from political oversight. Above all, McNaugher shows how the United States tries to buy research and development on the cheap, and how costly this has been. The nation can improve its acquisition process, he concludes, only when it recognizes the need to pay for the full exploration of new technology.

“Public Private Partnership:” Lessons from the Brazilian Armaments Industry

In Less than Twenty Years Brazil has become one of the ten largest exporters of conventional armaments in the world. How the Brazilian armaments industry has achieved such success offers a rich case study of an effective division of labor between state and firm. With the state acting as technological agent and ambassador to external markets, the firms have become innovators of internationally competitive armaments systems. Rather than being forced, by military control, to produce highly sophisticated weapons systems, Brazilian defense firms receive support to develop products which cater to an international demand for those conventional armaments which occupy a niche just below the technological frontier defined by the superpowers.

Change and Continuity in Defense PAC Behavior

One of the most important trends in PAC behavior has been the coordination of PAC strategies by such umbrella groups as the Business-Industrial Political Action Committee and such party organizations as the Republican National Committee. This article assesses the degree to which one set of important PACs—those representing key defense firms—has succumbed to or resisted such “nationalizing” forces. An analysis of the behavior of ten defense PACs across two consecutive election cycles indicates that defense PACs generally have remained independent actors and that their behavior appears remarkably insensitive to changes in the political environment.

Conversion of Defense Resources

For defense industries, it holds that, “Although individual defense firms—like other industries—have no particular claim to maintenance of their present size or even to continued existence, they rightly have a claim to the maximum advance information that is feasible about their defense markets and particularly about the prospective reduction of these markets.”

Coping with Planning Problems in Defense Industry Business

Problems of planning and developing future business in defense firms arise largely from the failure of executives to accept a dual responsibility: developing new while managing current business. An integrated organization concept used by some firms may assist them.