Research On Industrial Organization Of Competitive Weapons Procurement

Competitive procurement of weapons is significant for improving the quality andeffectiveness of the weaponry. Whether the progress of competitive procurement ofweapons is smooth depends on optimization of the size, structure and capacity of thedefense industry organizations. Therefore, competitive procurement of weaponsrequires corresponding development of industrial organization.Industrial organizationwhich works on researching and producing weapons is evolving with the changes of thenational economic system and the form of weapon procurement. From the dimension ofcompetitive procurement, the history of defense industrial organization is divided intothree stages. Competitive procurement of weapons requires the system of R&D andproduces into the national innovation system and the defense industrial base into abroader national industrial base, and establishes a new defense industrial organizationbased on the national innovation system and industrial base.Competitive procurement reduces transaction costs by lowering the contractor’sopportunistic behavior and reducing occupy rent due to asset specificity, and affects theform of industrial organization, boundaries, organizational innovation and governance.Correspondingly, the industrial organization reduce their transaction costs thoughinternal innovation, organizational governance and the reasonable control oforganizational boundaries, so as to become a priority selected form of organizationunder the competitive procurement of weapons. Lower transaction costs of the industrialorganization means the enhancement of organizational efficiency. Therefore, followingWilliamson s "trichotomy" of industrial organization, the thesis builds the frameworkfrom business organizations, intermediate organizations and market organizations fromthe perspective of transaction costs. The main conclusions are:Firm organizations are the basic organizational unit of the competitive procurementof weapons, with a typical bureaucratic characteristic. The pathway of competitiveprocurement of weapons affecting on firm organizations concludes the impact onenterprise’s competitive strategy, corporate boundaries, the impact of corporategovernance and corporate investment and financing. Firm organizations need tocultivate the core competitiveness of enterprises through continuous technologicalinnovation, organizational innovation and civil-military integration. According to theircore competitive advantages and features, firm organizations choose the appropriatecorporate boundaries and suitable manner to corporate into network organization.According to the thought of "subtraction" to “downsize”, firm organizations entityboundaries shrinking and the virtual control of the border expanding, it forms thepattern of “small entities, complicate network”; through inter-firm network relationshipsfirm organizations lower transaction costs and are access to resources and knowledge within the network. According to the degree of asset specificity and importance, firmorganizations implement a different mode of restructuring and ownership structure.Though hardening of enterprise budget constraints, optimizing financial and investmentstructure, firm organizations optimize the capital operation. Civil military integration isan important way of corporate organizational governance.Industry cluster is an intermediate organization between hierarchical firmorganization and market organization, which is an organizational innovation and policyinstruments under competitive procurement of weapons. First, the thesis use method ofprincipal component analysis to identify the equipment manufacturing industry clusterin Hunan Province. The results show that Hunan Province has advantage on syntheticmaterials manufacturing cluster, non-ferrous metal rolling processing industry cluster,the electronic components manufacturing cluster and other general equipmentmanufacturing industry cluster. These industry clusters should extend the industrialchain and provide the industry and technical support for the competitive procurement ofweapons supporting level. Secondly, on the basis of the quantitative identification ofthe manufacturing industry cluster, the thesis builds GEMS model to evaluate thecompetitiveness of industry cluster and give an example on dual-use specialty materialscluster in Hunan Province. The results show that the value of cluster s GEMS is423.506points. Hunan Province has strong advantage on dual-use specialty materialscluster. Carbon-carbon composites, high-performance molybdenum and molybdenumalloy bar cluster have a competitive advantage in the nation. However, the clusters values of local market and external market are low, which exists certain risk on clusterdevelopment. Finally, the thesis put forwards internal network governance which isbased on surplus of cluster and external governance which is based on surplus of valuechain. Because of technical factors, asset versatility, transaction cost savings, externaleconomic, Civil military integration is an important form of governance undercompetitive procurement. There are the civil-military integration models of“relying”,”interacting”and “insering”.Market is a trading organization. The ideal market should pursue to minimizetransaction costs. Competitive markets exist the trend of reducing transaction costsdissipation.” The oligarch-led, medium and small symbiotic” model is the ideal modelof market organization under competitive procurement. The market of weaponsprocurement has high administrative barriers and structural barriers. Transaction costsare important factors to cause entry barriers. The entry of potential enterprises canincrease the supply of weapons and lower price of weapons. The premise of potentialenterprises to enter is the profit which is able to compensate for the transaction costsand sunk costs resulting from investment in dedicated assets. Therefore, Governmentshould reduce market barriers and transaction costs of entry. Civilian enterprises shouldbe complementary symbiosis or cooperation-competition forms of access so as to reduce the obstruction of the reign of monopoly enterprises, while reducing their owntransaction costs to enter. Monopoly and market failure of the market of weaponsprocurement need be regulated. Market governance of competitive procurement ofweapons under market transactions cost savings should cultivate competitive bodiesthrough the reforming of the military industrial organization, designing competition toprotect "shadow team" and supporting and protecting small and medium enterprises. Itshould establish contestable market through weakening market entry barriers andreducing sunk costs of withdrawing weapons market. Government position and controlborder should be clear. Government should merger control provisions to improve thecontrol performance and enrich control means to prevent control captured so as toregulate the behavior of government regulation.