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

Industry and Innovation, Aug 2001 by Serfati, Claude

Another theoretical school that has a longstanding interest in power and control issues is finance capital theory. Here, the emphasis is on the way that ownership control and market power can be brought together, thanks to the intercorporate networks created through interweaving of share participation. Based on a comprehensive investigation, Scott (1997) found that extensive networks of intercorporate capital relations have formed in all of the advanced capitalist economies, with, however, distinctive national patterns of development. This approach allows us to understand what we mean by industrial activities-oriented "groups". These groups have dominant activities in given manufacturing and/or service industries, but their activities are managed as a particular type of asset, namely, the rate of return (RoR), which is measured against that offered by other types of assets-first and foremost, bonds and stocks. Indeed, these industrial groups are becoming more and more what has been called in France "financial groups with industrial activities".

In a study aimed at assessing French companies' technological performances, we reprocessed Ministry of Research (MoR) data through this analytical filter in order to take into account the capital ownership control on firms. Data from the MoR indicate that in 1994 total public contracts for R&D (military and civilian) allocated to industry amounted to 3.85 billion euros, mainly distributed between 1.78 billion from the MoD and 1.74 billion from civilian ministries. The MoD funding is focused on Defense Technological Programs (DTPs), while the civilian ministries' spending relates mainly to Civilian Major Technological Programs (CMTPs) in aeronautics and space, nuclear, telecommunication (1.74 billion euro). As we have seen, DTPs and CMTPs can be considered as quite close. The remaining funding (0.33 billion euro) is less programsand more incentives-oriented.

In our analysis of the MoR data (Serfati, with Carpentier 1997), we found that not only are public funds heavily concentrated on a few firms (120 out of the 3,500 firms declaring an R&D activity) but also that by taking into account the capital ownership control of firms all but a handful of the 120 firms receiving defense R&D contracts are owned by defense contractor groups. In fact, 10 industrial groups are the quasiexclusive recipients (over 98 percent) of defense budget R&D expenditures, whereas only a tiny 1 percent of military R&D contracts goes to independent firms, which are exclusively small and medium-sized enterprises.' Also, we found that the bulk (87 percent) of civilian public funds for CMTPs accrued to defense contractor groups. This contributes to a strong concentration of technical capabilities in a few industrial groups, a significant share of them are defense-oriented. In 1996, the top 50 groups accounted for 66 percent of the total R&D expenditures performed in France by industry. Our findings are that the 10 defense contractor groups perform as much as 35 percent of the total R&D performed by industry. This leading role played by defense contractor groups in the national R&D system6 is largely due to the huge amount of funds coming from ministries and governmental agencies, with only 52 percent of the groups' R&D expenditures self-funded.'