Abstract: The Discord between Strong Government Presence and Contrasting Business Practices in the Commercial Aircraft Industry

Mustafa Erdem Sakinc

Abstract

In the light of a renewed discussion of the role of governments for an industrial ''renaissance'' on both sides of the Atlantic, this study discusses the historical role of government in supporting the commercial aircraft industry in the United States and Europe from a developmental state perspective, which extends the role of governments beyond R&D incentives and product demand to a complex set of actions that invest in a knowledge base and mobilize and channel public resources to business enterprises and thus allow knowledge and innovations to diffuse across the economy. The study shows that the U.S. and European commercial aircraft industries, which are currently clustered around two leading firms, Boeing and Airbus, utilized substantial amounts of government finance and other forms of state support. However, especially in the last twenty years, these two firms have both shown contrasting and congruent corporate business practices that distort the balance of public and private interests in new aircraft development through their choices of utilizing these resources, either to create more value and evenly distribute it among stakeholders or to extract it only for shareholders. While Boeing, a characteristically financialized firm, exhibits a clear example of a value-extracting company, Airbus presents so far a more balanced set of actions trying to satisfy both public and private interests.