Visible Hand: The Government-Industrial Relationship and Its Effects on Transatlantic Arms Cooperation   [open pdf - 5MB]

The economic realities of declining defense budgets and a smaller global arms market have, in recent years, forced governments to look beyond their own national borders when purchasing new armaments. This new global approach by governments in both the United States and Western Europe has resulted in an unprecedented consolidation of defense industries on both sides of the Atlantic. The key to understanding these events and what the future will hold is found in an examination of the government-industrial relationship, national corporate governance systems, the direction of the consolidation process in Western Europe, obstacles to future consolidation, and the prospects for transatlantic cooperation. An analysis of corporate profit data from British, French, and German defense companies was completed to study the effects of government involvement in industry and ownership concentration. While no direct connection between corporate performance and these issues is possible, both government involvement and ownership concentration are shown to play a significant role in determining the national composition of mergers and investments. Cross-border mergers of defense firms are currently obstructed, however, by a state focus on employment issues, foreign investment restrictions, industrial security regulations, and arms export controls. An understanding of these issues and the will to enact reforms is necessary for the future of transatlantic cooperation.

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Defense Technical Information Center (DTIC): http://www.dtic.mil/dtic/
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