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Competition Policy, Rivalries, and Defense Industry Consolidation

Author

Listed:
  • William E. Kovacic
  • Dennis E. Smallwood

Abstract

Declining outlays for new weapons programs have triggered a process of consolidation that promises to shrink the U.S. defense industry drastically. Consolidation in the defense industry raises complex competition policy issues that are not amenable to conventional antitrust merger analysis. This paper presents a framework for identifying important contractor competencies, assessing rivalries in defense industry segments, and evaluating the competitive effects of mergers and other consolidation events. As applied to antitrust oversight and to Department of Defense funding, program, and acquisition strategy decisions, this framework can help preserve supply alternatives for developing state-of-the-art weapons needed to satisfy national security requirements.

Suggested Citation

  • William E. Kovacic & Dennis E. Smallwood, 1994. "Competition Policy, Rivalries, and Defense Industry Consolidation," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 91-110, Fall.
  • Handle: RePEc:aea:jecper:v:8:y:1994:i:4:p:91-110
    Note: DOI: 10.1257/jep.8.4.91
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.8.4.91
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    References listed on IDEAS

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    1. Keith J. Crocker & Kenneth J. Reynolds, 1993. "The Efficiency of Incomplete Contracts: An Empirical Analysis of Air Force Engine Procurement," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 126-146, Spring.
    2. Kovacic, William E, 1991. "Commitment in Regulation: Defense Contracting and Extensions to Price Caps," Journal of Regulatory Economics, Springer, vol. 3(3), pages 219-240, September.
    3. James J. Anton & Dennis A. Yao, 1990. "Measuring the effectiveness of competition in defense procurement: A survey of the empirical literature," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 9(1), pages 60-79.
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    Cited by:

    1. Andrew James, 2009. "Reevaluating the role of military research in innovation systems: introduction to the symposium," The Journal of Technology Transfer, Springer, vol. 34(5), pages 449-454, October.
    2. Yugank Goyal, 2019. "How Governments Promote Monopolies: Public Procurement in India," American Journal of Economics and Sociology, Wiley Blackwell, vol. 78(5), pages 1135-1169, November.
    3. Andreas Blume & Asher Tishler, 2000. "Security Needs and the Performance of the Defense Industry," CIG Working Papers FS IV 00-04, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    4. Wipprich, Mark, 2007. "Preisbindung als Kooperationsinstrument in Wertschöpfungsnetzwerken," Arbeitspapiere 60, University of Münster, Institute for Cooperatives.
    5. David R. King & John D. Driessnack, 2007. "Analysis Of Competition In The Defense Industrial Base: An F‐22 Case Study," Contemporary Economic Policy, Western Economic Association International, vol. 25(1), pages 57-66, January.
    6. Marc Guyot & Radu Vranceanu, 1997. "Quelle réglementation pour le secteur de la Défense : l'expérience américaine," Revue Française d'Économie, Programme National Persée, vol. 12(3), pages 167-193.
    7. Richard L. Fullerton & R. Preston McAfee, 1999. "Auctioning Entry into Tournaments," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 573-605, June.
    8. Saar Golde & Asher Tishler, 2004. "Security Needs, Arms Exports, and the Structure of the Defense Industry," Journal of Conflict Resolution, Peace Science Society (International), vol. 48(5), pages 672-698, October.
    9. Simonyan, Karen, 2014. "What determines takeover premia: An empirical analysis," Journal of Economics and Business, Elsevier, vol. 75(C), pages 93-125.

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    More about this item

    JEL classification:

    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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