Whether a government actually controls its defense industry has almost nothing to do with whether they own the companies.
March 26, 2026
Original Paper
Who Controls the Defence Industry?
SSRN · 6466078
The Takeaway
While we assume state-owned firms are puppets and private ones are independent, the data reveals a bimodal reality. The U.S. owns 0% of its major defense firms but exerts massive control through 'personnel interchange' and dependency, whereas other countries with 100% ownership often have surprisingly little formal governance over what the companies actually do.
From the abstract
<div> Defence markets exhibit asset specificity and bilateral monopoly with governments as sole customer. Transaction cost economics predicts state ownership or control in such circumstances. We examine what governments actually do. Ownership alone does not determine control. A state with zero equity can have influence through governance provisions and legal tools. Using large language model extraction from annual reports, we compile a dataset on corporate governance and state control for the la