The Conversion of Military Activities: A Strategic Management of the Firm Perspective

Studies on the conversion of military industrial activities up to now have largely ignored one of the main actors of the conversion process: the firm. Adopting a strategic management of the firm perspective, the purpose of this chapter is to give some insight on the way the conversion process will affect firms that have military activities. The first stage in the analysis is aimed at clearly identifying the main characteristics of defence-oriented activities, pointing out the specific part they play in a firm’s business portfolio, and understanding how they affect the formulation and implementation of a firm’s global strategy. Military industrial activities appear to have three main strategic impacts on firm’s business portfolio: (i) a technological impact; (ii) an impact in terms of financial resources and profitability; and (iii) an impact on the firm’s global risk level. Taking these points into account, one can suggest that the main impulse to proceed with a conversion process must necessarily be given by the State and that firms involved will generally oppose the process. A general framework for evaluating the effect on the firms of the conversion of their military activities is presented as a conclusion. It seems to imply that different firms face different problems and that they therefore require differentiated government measures; the central consideration for designing the government measures is the strategic impact of military activities on the business portfolio of the various firms.