The economics of defence industry mergers and divestitures

Economic Affairs

Volumn 17, Issue 4, 1997, Pages 28-32

  Markusen, Ann ^a,b  

^a RUTGERS UNIVERSITY   (United States)

^b Council on Foreign Relations ^*  (United States)

Author keywords

[No Author keywords available]

Indexed keywords

DEFENCE INDUSTRY; ECONOMIC ANALYSIS; INDUSTRIAL RESTRUCTURING; MERGER;

USA;

EID: 0031411998     PISSN: 02650665     EISSN: None     Source Type: Journal    
DOI: 10.1111/1468-0270.00055     Document Type: Article

References (38)

1. T. Sandler and K. Hartley (1995) The Economics of Defence, Cambridge: Cambridge University Press, ch. 6.
2. A. Markusen and J. Yudken (1992) Dismantling the Cold War Economy, New York: Basic Books, ch. 2.
3. United States Congressional Research Service (1994) F-22 Aircraft Program, Washington, DC: Congressional Research Service;
4. J. Drezner, et al., (1992) Maintaining Future Military Aircraft Design Capability, Santa Monica: RAND Corporation (RAND/R-41990AF).
5. H. Sapolsky and E. Gholz (forthcoming) 'Private Arsenals: America's Post Cold War Burden', in A. Markusen and S. Costigan (eds.), Arming the Future: A Defence Industry for the 21st Century, New York: Council on Foreign Relations.
6. M. Oden (forthcoming) 'Cashing-in, Cashing-out and Converting: Restructuring of the Defence Industrial Base in the 1990s', in A. Markusen and S. Costigan (eds.), Arming the Future: A Defence Industry for the 21st Century, op. cit.
7. K. Flamm (forthcoming) 'Redesigning the Defence Industrial Base', in A. Markusen and S. Costigan (eds.), Arming the Future: A Defence Industry for the 21st Century, op. cit.
8. W. Kovacic and D. Smallwood (1994) 'Competition Policy, Rivalries, and Defence Industry Consolidation'. Journal of Economic Perspectives, 8, 4, pp. 91-110.
9. K. Flamm, Journal of Economic Perspectives, op cit.
10. and Kovacic and Smallwood, Journal of Economic Perspectives, op. cit.
11. J. Kurth (1993) 'The Follow-on Imperative in American Weapons Procurement, 1960-1991', in J. Brauer and M. Chatterji (eds.), The Economics of Disarmament, New York: New York University Press.
12. R. Trevino and R. Higgs (1992) 'Profits of US Defence Contractors', Defence Economics, 3, 3, pp. 211-18.
13. K. Hartley (1992) 'Competition in Defence Contracting in the UK', Public Procurement Law Review, 6, pp. 440-54,
14. Sandler and Hartley, Public Procurement Law Review, op. cit. p. 197.
15. E. Pint and R. Schmidt (1994) Financial Condition of U.S. Military Aircraft Prime Contractors, Santa Monica: Rand, Project Air Force.
16. But two is preferable to one, since rivalry in the presence of technological dynamism and other factors may produce distinctive designs. See F. Scherer (1964) The Weapons Acquisition Process: Economic Incentives, Boston: Harvard University Press, pp. 47-48,
17. and Kovacic and Smallwood, The Weapons Acquisition Process: Economic Incentives, op. cit., p. 103.
18. R. J. Art (1968) The TFX Decision: McNamara and the Military, Boston: Little Brown and Company.
19. J. Alic, L. Branscomb, H. Brooks, A. Carter and G. Epstein (1992) Beyond Spinoff: Military and Commercial Technologies in a Changing World Cambridge, MA: Harvard Business School Press,
20. J. Gansler (1995) Defence Conversion: Transforming the Arsenal of Democracy, Cambridge, MA: The MIT Press.
21. M. Oden, Defence Conversion: Transforming the Arsenal of Democracy, op. cit.,
22. M. Oden, A. Markusen, D. Flaming, J. Feldman, C. Hill and J. Raffel (1996) From Managing Growth to Reversing Decline: The Los Angeles Economy in the Post Cold War Era, New Brunswick: Rutgers University, Project on Regional and Industrial Economics.
23. Office of the Under Secretary of Defence (Acquisition and Technology), Principal Deputy Assistant Secretary of Defence for Dual Use Technology Policy and International Programs (1994) World-Wide Conventional Arms Trade (1994-2000): A Forecast and Analysis, Washington: U.S. Department of Defence.
24. L. Korb (1996) 'Merger Mania', The Brookings Review, Summer, pp. 22-25;
25. A. Markusen (1997) 'The Foolish, and Costly, Defence Merger Mania', The International Herald Tribune, 11 January 1997.
26. G. Adams (1981) The Iron Triangle: The Politics of Defence Contracting, New York: Council on Economic Priorities.
27. W. D. Hartung (1996) Welfare for Weapons Dealers: the Hidden Costs of the Arms Trade, New York: World Policy Institute;
28. Project on Demilitarization and Democracy (1995) Hostile Takeover, Washington, DC: Project on Demilitarization and Democracy.
29. Kovacic and Smallwood, Hostile Takeover, op. cit., p. 94,
30. L. Lumpe (forthcoming) 'Limiting the Negative Consequences of Surplus U.S. Arms Production and Trading', in A. Markusen and S. Costigan (eds.), Hostile Takeover, op. cit.
31. The following points are developed at much greater length in A. Markusen, 'The Role of Finance Capital, Business Consultants and Pentagon Policy in Defence Industry Restructuring', Paper presented at the Klein Symposium, Penn State University, September, 1997.
32. Markusen and Yudken, Klein Symposium, op. cit., ch. 6.
33. Oden, Markusen et al., Klein Symposium, op. cit., ch. 3, 4.
34. See for instance D. Denis, D. Denis and A. Sarin (1997) 'Agency problems, Equity Ownership and Corporate Diversification', The Journal of Finance, 52, 2, pp. 135-160.
35. For an opposing argument and evidence, see J. Dow and G. Gorton (1997) 'Stock Market Efficiency and Economic Efficiency: Is There a Connection?' The Journal of Finance, 52, 3, pp. 1087-1130.
36. J. Feldman (1997) 'Diversification after the Cold War: Results of the National Defence Economy Survey', Working Paper, Project on Regional and Industrial Economics, Rutgers University, January,
37. M. E. Kelley and T. Watkins (1995) 'The Myth of the Specialized Military Contractor', Technology Review, 98, 3, pp. 52-58.
38. M. Brzoska, P. Wilke and H. Wulf (forthcoming), 'The Changing Civil-Military Production Mix in Western Europe's Defence Industry', in A. Markusen and S. Costigan (eds.), Technology Review, op. cit.