Can British defense firms diversify? The Nanoquest case and the limits to dual-use theories

This article investigates the case of Nanoquest, a small diversification project that was tied to BAE Systems’ earlier incarnation as British Aerospace (BAe). I show that British military firms can have success when diversifying into civilian markets, but the process can be sabotaged by managerial interference. I also illustrate the limited utility of dual-use theories in explaining diversification outcomes. Success and failure are also shaped by power relationships rather than simply by technological similarities or limitations. I show why discourses about dual use, the relatedness of military and civilian technologies, networks, learning, and information exchange cannot fully explain how and whether diversification barriers are overcome. One key reason is that the degree of dual-use relationships, or the commonality between military and civilian markets, is based on an historical process of learning and resource acquisition over time. This learning and resource acquisition in turn is mediated by various power structures and struggles within the firm as identified by institutional economists and various management theorists.