The Impact of Economic Austerity on U.S. and European Defense Industrial Bases

Abstract

The defense industry, both in the U.S. and Europe, has witnessed significant consolidation since the end of the Cold War. The question is whether defense industry consolidation has led to greater efficiencies, lower prices, and more innovation, or whether it has led to greater abuse of market power is a crucial issue. A second issue which is becoming more important in an increasingly globalized economy is whether joint ventures and alliances between U.S. companies and foreign companies are likely to be successful because the military forces of nation-states around the globe have been coalescing in the new millennium against a variety of global security threats, including the threat of terrorism. A third issue relates to whether the consolidation of defense contractors in Europe has led to more innovative products and lower costs. The purpose of this research is to examine the patterns in joint ventures, alliances, and mergers in Europe, in the U.S., and between U.S. companies and European companies.