adaptability of the French armaments industry in an era of globalization, The

Industry and Innovation, Aug 2001 by Serfati, Claude

Now, what is needed is to assess to what extent the basic traits of the FMSA are disappearing. As regards the consolidation of the French arms industry, Figure 3 shows that cross-shareholdings and strong state ownership, a strong feature of the "capitalisme ii la francaise" during the 1970s and 1980s, even if receding, did not disappear. Also, tentative estimates we made are that in 1998, the share of the state in major contractor aggregate arms production remains significant even in comparison with the 1980s, when the state's grip upon defense companies reached historical heights.

As indicated on Figure 3, not only does the state still retain significant interest in companies which have been privatized and have a major chunk of their capital floated on the stock market (Alcaltel, Aerospatiale, Matra-Lagardere, Thomson-CSF, Dassault), it also keeps full control of other major firms and institutions, e.g. CEA, DCN, GIAT, SNPE, SNECMA (see the part situated above the dotted line in Figure 3). And together with the role of state as shareholder, cross-shareholdings are aimed at "locking in" the control of the French Meso-system of Armaments and preventing foreign institutional investors from playing a leading role on the board of the defense contractor groups.

This strategy may be feasible in the arms industry, for a series of reasons. (1) Protecting the capital ownership from foreigners can be grounded in sovereignty and security motives (with practices such as "golden shares" held by states), which provides a mighty leverage for technological policies. By any standard, it is not a French specificity, and a comparison between the main European arms producing countries makes clear that, whatever the various ways for states to influence the arms industry, their influence remains strong (Serfati 2000c). (2) A major characteristic of this industry is as seen earlier that it is based upon the design and the production of highly complex systems, in which close partnership between systems integrators and sub-system and component producing companies is critically needed. This technologybased complementarity may ease the strengthening of financial relations between companies to co-finance high financial resources-demanding projects, to carry out industrial consolidation in order to reduce costs of design and production, and to get a monopoly position. (3) The way French elites go on training and recruiting maintains a near symbiosis between state institutions and the few large company members of the FMSA.13

CONCLUDING REMARKS

This paper has documented the significant role held by defense contractors and defense-related technological programs in the French technology policy. The paper also underlined how strong the institutional framework remains within which the arms industry is governed. This could be a puzzle for those who read globalization as a process leading to convergence in economic performances and institutional arrangements, hence narrowing, if not undoing national specificities.