Globalization and the U.S.Defense Industrial Base: The Competition for a New Aerial Refueling Tanker

The growth in the global economy and the trend toward outsourcing have given rise to concerns over the composition and strength of the U.S. industrial base and the degree of U.S. dependence on other countries for certain goods. The purpose of this article is to examine the concerns surrounding the alleged inroads of foreign manufacturers into the U.S. defense industrial base, as well as the background behind the concerns, with a specific focus on the recent competition over what may be one of the largest defense contracts in U.S. history to supply the United States Air Force with a new fleet of aerial refueling tankers. The article discusses the importance of imports and national defense spending in the U.S. economy, explores the dependence (or lack thereof) of the United States on foreign imports in the defense sector, explores strategies that have previously been deployed to reduce the role of foreign manufacturers in the U.S. defense industrial base, and examines in detail the recent tanker competition. The article argues that this competition required the deployment of innovative strategies on the part of the incumbent in the industry (Boeing) and the potential entrant (Northrop/EADS) in order to balance conflicting economic, political, and military procurement objectives.Business Economics (2008) 43, 45–56; doi:10.2145/20080406