In the current environment of excess capacity in the arms industry in combination with a continuing trend of rising research and development costs in this sector, companies have become increasingly active in attempting to apply strategies of internationalization to arms-producing activities. At the same time, the end of the Cold War has led to a relaxation in government attitudes toward military technology transfers within a broad group of industrialized countries. This article discusses three basic forms of internationalization: exports, foreign direct investment, and international cooperation arrangements. Cross-border merger and acquisition activities are mainly concentrated in Western Europe, in particular in the aerospace and electronics sectors, but there are also examples of international restructuring outside these areas. International cooperation projects with the Russian arms industry have been limited in number and scope, due to their uncertain future prospects.
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References
1.
1. See, for example, Organization for Economic Cooperation and Development, Globalisation of Industrial Activities (Paris: Organization for Economic Cooperation and Development, 1992).
2.
2. See, for example, U.N. Centre on Transnational Corporations (UNCTC), The Process of Transnationalization and Transnational Mergers, UNCTC Current Studies, series A, no. 8 (New York: UNCTC, 1989), p. 3 ff.
3.
3. A meaningful aggregation cannot be made unless the type, importance (in terms of, for example, technology), or size (for example, production value) of the agreement can be identified and measured.
4.
4. This process is succinctly described by Jorg Huffschmid and Werner Voß, “Militarische Beschaffungen, Waffenhandel, Rustungskonversion in der EG,”Progress (Institute fur Wirtschaftsforschung-Studien), no. 7, pp. 41-55 (1991).
5.
5. James B. Steinberg, The Transformation of the European Defense Industry: Emerging Trends and Prospects for Future U.S.-European Competition and Collaboration R-4141-ACQ (Santa Monica, CA: RAND, 1992), p. x.
6.
6. Elisabeth Sköns, “Internationalisation of the West European Arms Industry,” in Arms Industry Limited, ed. Herbert Wulf (New York: Oxford University Press, 1993), pp. 160-190.
7.
For a recent description of the different types of collaborative arrangements, see William Walker and Philip Gummett, Nationalism, Internationalism and the European Defence Market, Challiot Papers, no. 9 (Paris: Western European Union, Institute for Security Studies, 1993).
8.
8. A notable predecessor of the present trend of joint ventures is Euromissile, a company owned by DASA (previously MBB) and Aérospatiale, dating back to 1972 and set up to develop and produce missiles.
9.
9. An unnamed French industry spokesperson is quoted in Defense News, 10-16 May 1993, p. 3. Dr. Thomas Enders of DASA argued similarly in a telephone conversation with one of the authors on 6 Aug. 1993 and characterized the formula of the two-plus-two arrangement as not being sufficient to operate competitively on the global market.
10.
10. Eurocopter Group 1992 Annual Report (Paris: Eurocopter S.A., 1993), pp. 3, 17.
11.
11. Jean-Francois Bigay, quoted in Jane's Defence Weekly, 24 Oct. 1992, p. 40.
12.
12. Different shares are being published. This percentage is taken from Interavia Air Letter, 22 Apr. 1993, p. 1.
13.
13. Ian Anthonyet al., “Arms Production and Arms Trade,” in SIPRI Yearbook, 1993 (New York: Oxford University Press, 1993), pp. 444-445.
14.
14. Air Force Magazine, p. 60 (Aug. 1993).
15.
15. La Tribune Desfosses, 15 Feb. 1993, p. 1.
16.
16. UNCTC, Process of Transnationalization and Transnational Mergers, pp. 63-64.
17.
summarized in Margaret Sharp, “Industrial Policy in a Global Environment,”International Spectator, 28(2): 26-27 (Apr.-June 1993).
18.
18. For a description of the restructuring of the West European arms industry, see Susan Willett and William Walker, “Restructuring of the European Defence Industrial Base,”Defence Economics, 4(2): 141-160 (1993).
19.
SIPRI Yearbook 1993, pp. 440-441.
20.
20. Susan Willett, “Dragons' Fire and Tigers' Claws: Arms Trade and Production in Far East Asia,” in Post-Cold War Security Issues in the Asia-Pacific, ed. Colin McInnes and Mark G. Rolls, special issue of Journal of Arms Control and Contemporary Security Policy, 15(2) (Aug. 1994).
21.
21. This observation is based on the SIPRI company archives, which include files on about 500 arms-producing companies.
22.
22. Judith Reppy, “Unmanaged Change in the Defence Industry,” in Arms Industry Limited, ed. Wulf, pp. 56-57.
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23. The issues involved are described and a framework for decision making is proposed in Theodore H. Moran, “Foreign Acquisitions of Critical U.S. Industries: Where Should the United States Draw the Line?”Washington Quarterly, 16(2): 61-71 (Spring 1993).
24.
24. Which also appears to be the implication of the data shown by P. Dussauge and B. Garette, “Industrial Alliances in Aerospace and Defence: An Empirical Study of Strategic and Organizational Patterns,”Defence Economics, 4(2): 45-62.
25.
25. Thomas Enders, DASA, telephone conversation with one of the authors, 6 Aug. 1993.
26.
26. Quoted from an unpublished paper of the European Defence Industries Group, presented by the president of EDIG, Jan Bosma, at the seminar“Future Options for the European Defence Market,”West European Union Institute for Security Studies, Paris, 20-30 Apr. 1993, pp. 1, 2.
27.
27. Graham Woodcock, EDIG, telephone conversation with one of the authors, 6 Aug. 1993.
