The transition from defense contractor to commercial company: The Huntsville, Alabama case

Studies have documented the historic failure of defense contractors in commercial markets. Yet some defense firms make this transition successfully. Based on a survey of Department of Defense contractors located in Huntsville, Alabama, this paper compares the characteristics and business strategies of firms that were successful in commercialization with those firms that were not. Characteristics of firms gaining employees during the defense funding downturns of the early 1990s included: (1) being an 8A vendor; (2) being a manufacturer or technical services provider rather than a research and design firm; and (3) spending a higher proportion of total revenue on internal research and development and marketing.