Capabilities, strategy and environment: the adaptation of the UK military aircraft industry to the Post-Cold war environment

Abstract

This paper examines how companies in the UK' military aircraft industry have responded to the post-Cold War environment of reduced defence budgets. Giwen the substantial devline in levels of global defence spending since 1989, it is perhaps surprising that few companies have attempted to diversift out of defence markets. This paper considers the extent to which defence market environment has influenced the organizational capabilities possessed by companies potentially limiting their relevance to other markets, thus constraining the diversification opportunities available. The explanation suggested here is largely neo-Schumpeterain, where a company's interaction with, and interpretation of, its market environment results in it possessing rather specific and non-general capabilities. However, the natue of organizational capabilities was not found to be an adequate explanation on its own for the company strategy observed. Rather, strategy was as much influenced by the corporate focus on short-term economic considerations and the policy of central government towards both defence procurement changes and the lack of support given to diverisifications.