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THE STRUCTURE OF THE MILITARY‐INDUSTRIAL COMPLEX IN THE UNITED STATES AND ITS IMPACT ON INDUSTRIAL CONCENTRATION
Author(s) -
Marfels* Christian
Publication year - 1978
Publication title -
kyklos
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.766
H-Index - 58
eISSN - 1467-6435
pISSN - 0023-5962
DOI - 10.1111/j.1467-6435.1978.tb00649.x
Subject(s) - procurement , incentive , dominance (genetics) , business , surprise , mergers and acquisitions , industrial organization , economics , market economy , finance , marketing , biochemistry , chemistry , gene , psychology , social psychology
SUMMARY It comes perhaps as no surprise that approximately 70% of all outlays for military procurement in the United States were accounted for by the 100 largest military contractors in each year during 1965–1974. This clear dominance can be primarily explained by the non‐market character of the defense market where the bulk of contracts is negotiated rather than competitive in terms of sealed bids. Long‐term procurement contracts as a steady and secure source of income may also serve as an incentive for conglomerates to acquire defense contractors in order to enter the defense market via toehold acquisitions. The penetration of the so‐called ‘new conglomerates’ during the 1960s into the defense market is a case in point. It can be safely assumed that the procurement incentive was the prime motivation in the merger decision among these pure‐conglomerate mergers. Furthermore, the majority of mergers benefited greatly from a generous implicit grant for mergers, viz. the provision of a tax‐free reorganization according to Sec. 368 IRC.