Industry Structure, Innovation, and Competition in the U.S
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The U.S. Combat Aircraft Industry 1909-2000 Structure Competition Innovation Mark Lorell Prepared for the Office of the Secretary of Defense R NATIONAL DEFENSE RESEARCH INSTITUTE Approved for public release; distribution unlimited The research described in this report was sponsored by the Office of the Secretary of Defense (OSD). The research was conducted in RAND’s National Defense Research Institute, a federally funded research and development center supported by the OSD, the Joint Staff, the unified commands, and the defense agencies under Contract DASW01-01-C-0004. Library of Congress Cataloging-in-Publication Data Lorell, Mark A., 1947- The U.S. combat aircraft industry, 1909–2000 : structure, competition, innovation / Mark A. Lorell. p. cm. “MR-1696.” ISBN 0-8330-3366-2 (pbk.) 1. Aircraft industry—United States—History. 2. Aircraft industry—United States—Military aspects—History. 3. Fighter planes—United States—History. I.Title. HD9711.U6L67 2003 338.4'7623746'09730904—dc21 2003008114 RAND is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND® is a registered trademark. RAND’s publications do not necessarily reflect the opinions or policies of its research sponsors. Cover design by Peter Soriano © Copyright 2003 RAND All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from RAND. Published 2003 by RAND 1700 Main Street, P.O. Box 2138, Santa Monica, CA 90407-2138 1200 South Hayes Street, Arlington, VA 22202-5050 201 North Craig Street, Suite 202, Pittsburgh, PA 15213-1516 RAND URL: http://www.rand.org/ To order RAND documents or to obtain additional information, contact Distribution Services: Telephone: (310) 451-7002; Fax: (310) 451-6915; Email: [email protected] PREFACE Congress has expressed concerns about three areas of the U.S. fixed- wing combat aircraft industry:1 • Retention of adequate competition in the design, engineering, production, sale, and support of military aircraft • Continued innovation in the development and manufacture of military aircraft • Actual and future capability of more than one aircraft company to design, engineer, produce, and support military aircraft. This report provides a brief survey of industry structure, innovation, and competition in the U.S. fixed-wing combat aircraft industry from its earliest days to the present. It supports a much larger research effort examining the future of the U.S. military aircraft industrial base that responds to the above three congressional concerns. The overall RAND research effort on the future viability of the com- bat aircraft industry has four basic research questions, or tasks: • How is the industry different now from what it was in the past? • What do the industry’s competition and innovation pictures look like today? ______________ 1As noted in Appropriation Conference Committee, FY02 Defense Appropriations Act Report, Washington, D.C.: House Report 107-350, 19 December 2001, Section 8162. iii iv U.S. Combat Aircraft Industry, 1909–2000: Structure, Competition, Innovation • What courses of action does the Department of Defense (DoD) have to affect competition and innovation in the future? • What policy options emerge from these courses of action? This report aims at providing part of the answer to the first research question. It carefully examines what the industry looked like in the past and how it evolved over time, and it emphasizes particularly the nature of the competition among prime contractors/integrators and the history of innovation in fixed-wing combat aircraft. The research reported here includes “lessons learned” from past experience and suggestions for further research that may contribute to developing answers to the other three overarching research questions listed above. It draws heavily on prior published and unpublished research sponsored by the United States Air Force and conducted under the auspices of the Resource Management Program of RAND’s Project AIR FORCE. Answers to all four questions are sought in a companion volume: John Birkler, Anthony G. Brower, Jeffrey A. Drezner, Gordon Lee, Mark Lorell, Giles Smith, Fred Timson, William P. G. Trimble, and Obaid Younossi, Competition and Innovation in the U.S. Fixed- Wing Military Aircraft Industry, Santa Monica, Calif: RAND, MR-1656-OSD, 2003. This research was sponsored by the Office of the Secretary of Defense (OSD) and was overseen by the Office of the Deputy Under Secretary of Defense for Industrial Policy. This research was conducted within the Acquisition and Technology Policy Center of RAND’s National Defense Research Institute (NDRI), a federally funded research and development center (FFRDC) sponsored by OSD, the Joint Staff, the unified commands, and the defense agencies. NDRI is located within RAND’s National Security Research Division. CONTENTS Preface ......................................... iii Figures ......................................... ix Tables.......................................... xi Summary ....................................... xiii Acronyms ....................................... xxi Chapter One INTRODUCTION .............................. 1 Research Approach and Key Issues ................. 2 Technology Eras in Fixed-Wing Combat Aircraft ....... 4 Numbers of Competing Prime Contractors ........... 7 Chapter Two INDUSTRY STRUCTURE AND COMPETITION IN THE BIPLANE ERA ............................. 13 U.S. Industry Falls Behind in World War I ............. 14 Low Demand, Lack of Competition Stifle Innovation .... 17 U.S. Fighter Development During the Biplane Era ...... 24 Curtiss..................................... 24 Boeing..................................... 25 U.S. Bomber Development During the Biplane Era ...... 27 Summary: An Era of Conservative Designs and Little Innovation................................ 29 v vi U.S. Combat Aircraft Industry, 1909–2000: Structure, Competition, Innovation Chapter Three THE MONOPLANE REVOLUTION .................. 33 New Markets and Greater Competition Pave the Way for Innovation ............................. 33 The Monoplane Bomber Revolution ................ 39 The Monoplane Fighter Revolution ................. 44 Markets, Competition, and Innovation During the Monoplane Revolution ...................... 47 Industry Structure During the Monoplane Revolution ... 49 Summary .................................... 54 Chapter Four THE SUBSONIC- AND EARLY SUPERSONIC-JET REVOLUTIONS ............................ 57 The Subsonic-Jet Era, 1945–1953 ................... 59 The Subsonic-Jet Revolution, 1942–1947 ............ 59 Subsonic-Jet Technology Refinement, 1947–1953 ..... 65 The Supersonic-Jet Era, 1953–1981 ................. 65 The Early Supersonic-Jet Revolution, 1953–1962 ...... 66 Industry Structure During the Subsonic-Jet Era and Early Supersonic-Jet Sub-Era .................. 73 Summary .................................... 75 Chapter Five THE AGILE SUPERSONIC TECHNOLOGY REVOLUTION ............................. 77 Supersonic Technology Refinement, 1962–1972 ........ 77 The Agile Supersonic-Jet Revolution, 1972–1974 ........ 84 The Air-Superiority Fighter Requirement ........... 84 The F-X and VFX Competitions .................. 86 The Lightweight Fighter Competition .............. 88 Agile Supersonic Fighter Technology Refinement, 1974–1981 ................................ 90 Industry Structure and Competition During the 1960s and 1970s ................................ 92 Summary .................................... 95 Chapter Six THE STEALTH REVOLUTION ..................... 97 Industry Leaders in the Stealth Revolution ............ 97 Origins of the Stealth Revolution ................... 98 The F-117 Competition .......................... 103 Contents vii The Advanced Technology Bomber Competition ....... 104 The Advanced Tactical Fighter Competition ........... 106 Industry Structure During the Stealth Revolution ....... 110 Summary .................................... 112 Chapter Seven AN END TO COMPETITION AND INNOVATION? ...... 115 JSF: The Last Fighter Competition? ................. 116 Conclusions .................................. 118 Bibliography ..................................... 123 FIGURES 1.1. Major U.S. Prime Contractors by Aircraft Specialization, 1910–2000 ..................... 9 1.2. Major U.S. Prime Contractors with Areas of Combat Aircraft Specialization (Bombers and Fighters) ...... 10 1.3. Prime Contractors During the Five Principal Air Vehicle/Engine Combat-Aircraft Technology Eras ... 11 2.1. U.S. Army and Navy Air Appropriations, 1917–1927 ................................. 19 2.2. U.S. Military and Commercial Aircraft Production, 1917–1927 ................................. 20 2.3. U.S. Army Air Service Top Contractors, 1919–1925 ... 22 2.4. Total Value of Major Army and Navy Aircraft Production Contracts by Contractor, 1921–1927 ..... 23 3.1. U.S. Military and Commercial Aircraft Production, 1928–1938 ................................. 36 3.2. U.S. Army and Navy Air Appropriations, 1928–1939 ................................. 37 3.3. Total U.S. Aircraft Industry Sales Compared with Exports and Army/Navy Aircraft Procurement, 1931–1939 ................................. 49 3.4. Total Sales for Top Aircraft Contractors, 1938 ....... 51 4.1. U.S. Defense Budget, Procurement, and R&D, 1950–2002 ................................. 59 4.2. Number of Combat-Aircraft Prime Contractors,