The Political Economy of Aerospace Industries

The Political Economy of Aerospace Industries

A Key Driver of Growth and International Competitiveness?

Keith Hartley

The Political Economy of Aerospace Industries will appeal to undergraduate and graduate students in industrial and defence economics, public choice and policy courses. It will also be of interest to researchers, policy-makers and those involved in the industry in various different capacities.

Chapter 8: A company case study. BAE Systems: achievements, rivals and prospects

Keith Hartley

Subjects: economics and finance, industrial economics, political economy, public choice theory, politics and public policy, political economy, public choice


Previous chapters dealt with industry structure, conduct and performance. This chapter shows the opportunities for a firm-level analysis using BAE Systems as an example of a company case study approach. BAE Systems plc is the UK’s largest defence contractor; in 2008 it was the world’s top arms company and in 2011, it ranked third in the world (SIPRI, 2010; 2013). The company has undertaken a remarkable transformation involving changes of ownership, changes of business policy, extensive mergers and company disposals and a shift of focus from the UK to becoming a major participant in the US defence market. As a defence company, it has close relationships with the UK and foreign governments and has experienced problems in managing some of its major UK projects. From a public choice perspective, the company can be viewed as a powerful producer group with lobbying influence some of which has led to allegations of ‘improper behaviour’ (see Chapter 9). This chapter presents a brief history of the company, its ownership and organisation followed by an assessment of its conduct and performance. There is an assessment of its achievements, its major rivals and its future challenges. Data for the survey were obtained from company annual reports which provided information on mergers and disposals, company organisation and statistics on sales, productivity and profitability. Since BAE Systems is a specialist defence company, its data on sales, productivity and profitability reflect its performance in defence markets.

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