An Analysis Of Firm Motivation In The Defense Industry

Abstract

This article considers the performance of firms in the defense industry. The analysis suggests that in terms of profitability and revenue there is no advantage to be gained by a firm from increasing the proportion of its total sales which go to the military. As a corollary to this proposition we find that the firms examined are profit maximizers and are not content to simply maximize revenue. Another conclusion to be drawn from the empirical analysis that there is a difference between high and low defense commitment firms and that this distinction occurs when the percentage of sale to the government reaches the seventeen percent level.