Military-Industrial Complexes and Their Variations

Dwight David Eisenhower delivered one final address to the American public on January 17, 1961, as he prepared to step down from the U.S. presidency. Often remembered as an inarticulate public speaker, Eisenhower surprised his audience with his clear warning that “in the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex.” Eisenhower’s words resonated with both his audience and subsequent generations because he gave voice to the growing level of popular anxiety over whether armaments’ increasing importance to national security would ultimately endow defense firms with a degree of power incompatible with liberal democracy. Although Eisenhower’s concerns about defense firms’ antidemocratic potential echoed those of policymakers and scholars since the First World War, Eisenhower’s formulation of the military-industrial complex problématique followed on the heels of earlier analytic models—notably the “merchants of death” and “garrison state” hypotheses—and preceded later rearticulations, such as that of the “iron triangle.” It is possible now, with a century of perspective on this literature, to assess which hypotheses about defense firms’ deleterious impact on society and government have been borne out by subsequent events and which have not. Within this context, many of the worst fears embodied in the earlier theories have not been borne out by subsequent events. Defense firms did not “cause” wars as per the merchants-of-death hypothesis, and democracy did not give way in states where it already existed to the authoritarian rule of “specialists of violence.” Nonetheless, the core insight of the military-industrial complex and iron triangle schools of thought—that defense industries and their allies in the military and politics will act as an interest group to promote procurement projects—has proven robust. The way that these dynamics occur, however, varies from state to state as a function of their institutions. Even though the production of armaments by defense firms headquartered in one’s state exercises a distorting effect on national politics and military procurement, few states can escape this dynamic. The national security advantages of greater supply security and enhanced military adaptation, combined with the fear that once abandoned, defense-industrial capabilities cannot be quickly reconstituted, compels most states that can produce armaments to do so. A military-industrial complex, of some form, is thus a fatality for the modern state.

Civil–Military Patents and Technological Knowledge Flows Into the Leading Defense Firms

Drawing upon 106,181 patent applications by the world’s largest defense firms and 241,571 patent citations (2002–2011), this article has two main objectives. The first is to explore the factors affecting the production of mixed patents (those with potential dual applications in both military and civilian spheres). The second is to identify the causes of the use of military knowledge for civilian inventions ( spin-off) and the use of civilian knowledge in military patented technologies ( spin-in). Our calculations show highly significant coefficients for the variables capturing the “military technological capability” and the size of the company in explaining the production of mixed technologies. The spin-off process is affected by the military technological capability, the size of the firm, and the location. The spin-in mechanism is explained by the military technological capability and the location of the firm, while the size of the company is not relevant.

Corporate governance, firm performance and executive pay: A comparison of defense and non-defense firms

This study analyses pay-performance relationship and pay structure of executives and tests whether the pay structure of CEOs differs across firms in the defense and non-defense sector using econometric methodology. The empirical results based on ordinary least squares, Probit and Tobit methods show that on an average, executives in the defense firms earn more than their counterparts in the non-defense sector. However, when we control for governance structure, firm performance and other characteristics, the difference in executives’ remuneration vanishes. The important determinants of executive pay are the legal system, firm performance measured by Return on Assets (ROA), whether the CEO is also Chairman of the board, and size of the firm. The estimates of the determinants of restricted stock awards showed that firm performance, governance and other characteristics significantly influence the likelihood of obtaining restricted stock awards and also the value of the stock award.

Corporate performance drivers in vertical downstream alliance portfolios: The Korean defense industry

In this study, we examine the impact of portfolio configuration on corporate performance in a technological vertical downstream alliance portfolio. First, we explore whether differences in characteristics such as innovativeness, reputation, and bargaining power between a focal firm and its partners affect corporate performance. Second, considering these differences between a focal firm and its partners, we analyze whether an alliance portfolio structure spanning structural holes or a densely embedded network is preferable. We examine 44 leading Korean defense firms over the period 1995–2010 using the two-step generalized method of moments. Our principal arguments emphasize that differences between a focal firm and its partners (in terms of innovativeness, reputation, and bargaining power) affect corporate performance differently. This concept contrasts that of previous studies, which argued that allying with dominant partners is generally better. The arguments also emphasize that the alliance portfolio structure should differ depending on the differences in terms of the three capabilities between a focal firm and its corporate partners.