The economics of defence industry mergers and J c divestitures |
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| Authors: | Ann Markusen |
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| Institution: | Ann Markusen is Professor and Director, Project on Regional and Industrial Economics, Rutgers University and Senior Fellow, Council on Foreign Relations, New York She thanks the MacArthur Foundation, the Rockefeller Family Fund, the Council on Foreign Relations and the Bonn International Center for Conversion for support for this research, and her colleagues at PRIE and BICC. and members of the Council on Foreign Relations' Study Group on Consolidation, Downsizing and Conversion In the US Military Industrial Base for discussions and insights on these issues. |
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| Abstract: | High profile mergers in the 1990s have reduced major defence competitors to three in the USA and may evoke corresponding European consolidation and international mergers. The mergers may reduce capacity and help achieve economies of scale, but pose cost, quality and innovation concerns and have undermined diversification, conversion and civil/military integration. Expectations of enhanced political influence and short-term financial returns as well as new, perverse government incentives help to explain why the mergers have occurred. Greater international cooperation, specialisation and trade and better analysis of the defence industrial base are recommended as antidotes for the negative impacts of the mergers. |
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