“Airbus vs. Boeing in Super Jumbos: A Case of Failed Preemption”

plane instead of ceding the VLA market to Airbus. And Boeing’s senior managementappeared to find the commercial aircraft group’s claims on corporate wealth difficult toresist because the division still represented more than 60% of Boeing’s total revenues andwas a key part of company’s corporate identity.Place Figure 4 approximately hereThat Boeing’s top management ultimately did manage to resist the internalimpetus to build a very large aircraft seems to reflect, in part, three macro-organizationalchanges at the company in the late 1990s. First, Boeing built up its defense, space andcommunications businesses by acquiring Rockwell International’s aerospace businessesin 1996, McDonnell-Douglas in1997, and Hughes Space and Communications in 2000. 66These acquisitions and a newfound emphasis on commercial aircraft services helpedcreate growth options outside the traditional realm of commercial aircraft construction: inlate 2001, Boeing executives have publicly stated that the company would stake neartermgrowth on its Southern California space, communications and missile operationsinstead of commercial aircraft. 67Second, aided by an inflow of top managers from McDonnell Douglas andelsewhere into what had historically been an insular, engineering-driven environment,Boeing instituted a much more detailed system of financial controls and performancemeasurement. A system for tracking product line profitability was reportedly put intoplace for the first time, and to further the company’s stated goal of increasing its stockprice five times in five years, 68 the Board instituted a new incentive program that linkedcompensation with stock price appreciation, and established stock ownership guidelinesfor top executives. 69 These changes facilitated a shift in the mode of resource allocationthat placed more emphasis on efficiency and shareholder value rather than historicalentitlement, engineering challenges, and a host of other non-economic criteria.Third and most recently, Boeing decided to relocate its corporate headquartersfrom Seattle to Chicago. An important reason for the move, according to Boeing’s topmanagement, was the belief that the corporate center would remain too prone to theinfluence of the commercial aircraft group as long as the two headquarters remained36