Blažek, Jiří; Lypianin, An on
A icle
Mili a y con lic s and he pe o mance o s a e-owned en e p ises:
A s udy o Uk aine's ae ospace, de ense, and elec o-enginee ing
indus ies be o e and a e he 2014 C imea and Donbas occupa ion
ZFW - Ad ances in Economic Geog aphy
P o ided in Coope a ion wi h:
De G uy e B ill
Sugges ed Ci a ion: Blažek, Jiří; Lypianin, An on (2024) : Mili a y con lic s and he pe o mance
o s a e-owned en e p ises: A s udy o Uk aine's ae ospace, de ense, and elec o-enginee ing
indus ies be o e and a e he 2014 C imea and Donbas occupa ion, ZFW - Ad ances in Economic
Geog aphy, ISSN 2748-1964, De G uy e , Be lin, Vol. 68, Iss. 3/4, pp. 182-194,
h ps://doi.o g/10.1515/z w-2024-0049
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ZFW - Ad . in Econ. Geog . 2024; 68(3–4): 182–194
Jiří Blažek* and An on Lypianin
Mili a y con lic s and he pe o mance o s a e-owned
en e p ises: a s udy o Uk aine’s ae ospace, de ense, and
elec o-enginee ing indus ies be o e and a e he 2014 C imea
and Donbas occupa ion
h ps://doi.o g/10.1515/z w-2024-0049
Recei ed Janua y 29, 2024; accep ed Oc obe 17, 2024;
published online No embe 12, 2024
Abs ac :This s udy add esses he unde - esea ched
ole o s a e-owned-en e p ises (SOEs) in global alue
chains/p oduc ion ne wo ks (GVCs/GPNs). I examines how
heeconomicpe o mance, o eign ade,and aluecap u e
o Uk ainian fi ms – classified by owne ship, posi ion in
GVCs/GPNs, size, and di e sifica ion o hei cus ome
base – ha e e ol ed ollowing he Russia’s occupa ion
o C imea and pa s o Donbas in 2014. The s udy e eals
significan di e ences in he dis ibu ion o SOEs, p i a e,
and o eign en e p ises be ween he ae ospace/de ence and
elec o-enginee ing indus ies. O e all, since he Russian
agg ession in 2014, he ae ospace and de ence indus ies
ha e ou pe o med elec o-enginee ing fi ms, la gely due
o s ong s a e suppo . The s udy concludes wi h b oade
obse a ions ha while e en in ensi e mu ual ade could
no p e en he wa , he wa does no necessa ily lead o a
comple e cessa ion o mu ual ade.
Keywo ds: s a e-owned en e p ises; global p oduc ion ne -
wo ks; geopoli ical decoupling; ie ; economic pe o mance
and alue cap u e
1 In oduc ion
S a e-owned en e p ises (SOEs) a e o en conside ed less
p ofi able and less e icien compa ed o p i a e co po-
a ions. This claim is a ibu ed o a la ge se o ac o s
anging om accoun abili y issues, go e nance s uc u e,
and human esou ces managemen , o mul iple o hyb id
objec i es o SOEs, which, in addi ion, end o be poo ly
*Co esponding au ho : Jiří Blažek, Depa men o Social Geog aphy
and Regional De elopmen , Cha les Uni e si y, P ague, Czechia,
E-mail: [email p o ec ed]
An on Lypianin, Depa men o Social Geog aphy and Regional De elop-
men , Cha les Uni e si y, P ague, Czechia,
E-mail: [email p o ec ed]
defined and moni o ed (Lazza ini and Musacchio 2018). A
numbe o s udies in es iga ed he changes in economic
pe o mance o SOEs a e hei p i a iza ion. Acco ding o
a e iew o hese s udies, in he majo i y o cases, p i a iza-
ion leads o imp o ed e iciency, p ofi abili y, and financial
heal h o he p i a ised fi ms (Megginson and Ne e 2001).
This iew aligned nea ly wi h he Washing on consensus
insis ing ha mac oeconomic s abili y, libe alisa ion and
p i a iza ion o m he co e o economic success (Es in e al.
2019).
Howe e , while he Washing on consensus began o
lose ac ion app oxima ely a ound he 1990s, some o i s
in ellec ual ai s ha e been e ained such as an (o e )
gene alized iew on he SOEs (Wade 2018). Es in e al.
(2019) conduc ed an ex ensi e compa a i e s udy in es iga -
ing labou p oduc i i y o SOEs wi h hei p i a e coun e -
pa s ac oss 57 coun ies and e ealed ha he di e ence
in labou p oduc i i y be ween SOEs and p i a e fi ms is
subs an ially influenced by he quali y o he ins i u ional
sys eminspecificcoun ies.O e all,SOEsand p i a een e -
p ises do no display significan ly di e en le els o labou
p oduc i i y, and when di e ences do a ise, labou p o-
duc i i y is highe in SOEs (Es in e al. 2019). The find-
ing ha he ela ion be ween labou p oduc i i y o SOEs
and p i a e en e p ises depends on mul iplici y o ac o s,
especially on ins i u ional sys em is impo an , and wa ns
agains excessi e gene alisa ions. Mo eo e , he dis ibu-
ion o SOEs is highly une en ac oss indus ies in indi idual
coun ies and ends o be s ong especially in indus ies
deemed s a egic and/o ela ed o na u al esou ce ex ac-
ion (Shapi o e al. 2018).
In addi ion, an impo an gap in ou unde s and-
ing is he posi ion and he ole o SOEs in global alue
chains/global p oduc ion ne wo ks (GVCs/GPNs).1This is
su p ising as eme ging economies especially o en exhibi
subs an ial s a e owne ship among hei la ges fi ms, and
hese fi ms ha e been inc easingly engaged in he global
1Al hough some di e ences be ween hese s eams can be iden ified,
we claim ha hei co e is simila . The e o e, o acknowledge he
dis inc i e con ibu ion bu also he sha ed co e o hese heo ies, we
use he GVC/GPN ac onym o deno e his igo ous esea ch s eam.
Open Access. ©2024 he au ho (s), published by De G uy e . This wo k is licensed unde he C ea i e Commons A ibu ion 4.0 In e na ional License.
J. Blažek and A. Lypianin: Mili a y con lic s and he pe o mance o s a e-owned en e p ises —183
economy in ecen decades (Kowalski e al. 2013). Jones and
Zou (2017) e en a gued ha he massi e o e seas expansion
o Chinese SOEs is a co e d i e o China’s ise o g ea -
powe s a us.
In his pape , we selec ed s a egic Uk ainian indus-
ies o a case s udy due o he ollowing easons. Fi s ,
Uk aine is an eme ging economy whe e SOEs play a sig-
nifican ole. Second, while he e is a conside able body
o esea ch explo ing he economic pe o mance o SOEs
ollowing hei p i a iza ion (Megginson and Ne e 2001),
he numbe o s udies examining he impac o mili a y
conflic s on fi ms’ pe o mance is limi ed. Mo eo e , hese
s udies do no specifically compa e SOEs wi h p i a e fi ms
(Pe acco and Schweige 2012). The e o e, an in es iga ion
in o Uk ainian s a egic indus ies can e eal he dynamics
o economic pe o mance be ween SOEs and p i a e en e -
p ises unde challenging condi ions ollowing he Russian
mili a y agg ession in 2014. Thi d, his case is pa icula ly
in iguing due o he excep ionally s ong economic ies
be ween he Uk ainian and Russian economies, e en in he
mos s a egic and sensi i e indus ies, un il 2014.
The pape is s uc u ed as ollows: The nex sec ion
de elops he concep ual amewo k o he s udy, which is
cen e ed on SOEs as well as he no ion o alue cap u e. A
b ie ou line o e olu ion o Uk ainian ae ospace, de ense,
and elec o-enginee ing indus ies ollows. Subsequen ly,
ou me hodological app oach is explained. The empi ical
sec ion hen p esen s he main esul s o ou analysis, and
he final sec ion summa izes he main con ibu ion o his
s udy and conside s a enas o u u e esea ch.
2 The ole o SOEs in he economy
and hei posi ion in global alue
chains/global p oduc ion
ne wo ks
2.1 Changing iews on he ole o SOEs
in economic de elopmen
The ole o SOEs in cu en economies is con es ed. While
unde heWashing onConsensus,SOEs we eo en ega ded
as elic s o he pas , oday, hey appea o play an impo -
an ole in many coun ies and sec o s, pa icula ly hose
c i ical o na ional secu i y o esilience. Fo example, he
s a e-backed Japan In es men Co po a ion (JIC) ecen ly
acqui ed JSR, a globally impo an Japanese semiconduc-
o chemical supplie (Kleinhans 2024). Gi en heigh ened
global geopoli ical ension (Bedna ski e al. 2023;Blažek
and Lypianin 2024;Glückle and Wójcik 2023;Kal elage
and Tups 2024;Pa línek 2024), which, in e alia, led o con-
ce n o he EU poli icians abou he limi ed con ol o e
p edomina ely p i a e manu ac u e s wi hin he Eu opean
de ence indus y, we can o esee a much mo e ac i e ole
o go e nmen s (including hose o he mos ad anced
coun ies) in he economy. Acco dingly, Aoyama e al. (2024)
ecen ly a gued ha he p ima y impe a i e in GVC/GPN
o ches a ionhasshi ed om fi m-cen iccos -e iciency o
diplomacy and esilience, as mul ila e al s a e alliances gain
p ominence in shaping p oduc ion ne wo ks, especially in
s a egic indus ies. Mo eo e , o hcoming economic ans-
o ma ion, induced by g and socie al challenges including a
need o ackle clima e change (and) o sa egua d he sus ain-
abili y o he global en i onmen al sys em, will also equi e
he s a es o ake a much mo e ac i e ole in he economy
and socie y (Mazzuca o and Ryan-Collins 2022).
A subs an ial body o esea ch has compa ed he eco-
nomic pe o mance o SOEs and p i a e fi ms (Lazza ini
and Musacchio 2018). The p e ailing consensus om hese
s udies is ha SOEs o en exhibi lowe e iciency and p o -
i abili y (Li and Xia 2008). Simila ly, s udies on he impac o
p i a iza ion o SOEs conclude ha s a e-owne ship esul s
in a de e io a ion o fi m pe o mance (Cosse e al.2020;
MegginsonandNe e 2001).Theunde pe o mance o SOEs
can be a ibu ed o a ious ac o s including a lack o
compe i i e p essu e, absence o p ofi mo i e and accoun -
abili y o sha eholde s, mo al haza ds associa ed wi h s a e
gua an ees, co up ion, nepo ism, and li e ime employmen
con ac s o wo ke s, which can educe p oduc i i y (Le
e al. 2023). Howe e , some au ho s ha e no ed a con adic-
ion be ween he widesp ead pe cep ion o SOEs as unde -
pe o ming en i ies and hei pe asi e p esence ac oss a
b oad ange o indus ies ac oss a ious economies, includ-
ing hose ha a e dynamically expanding o highly de el-
oped (Jones and Zou 2017;Lazza ini and Musacchio 2018;
Li and Xia 2008). Mo eo e , s udy by Le e al. (2023) on
Indian and Chinese SOEs has documen ed ha SOEs end o
inno a e mo e han p i a e fi ms.
Indeed, he main a ionale o he c ea ion o a s a e-
owned en i y is a ely p ofi maximiza ion. In economics
and in e na ional business li e a u e, he e a e wo adi-
ional explana ions o he exis ence o SOEs. The fi s is
esolu ion o ma ke impe ec ions, and he second is poli -
ical s a egies o go e nmen s which may be d i en by a -
ious easons, such as boos ing economic g ow h, inc easing
employmen o engagemen in indus ies deemed s a egic
(Cue o-Cazu a e al. 2014;Babic 2021). The e o e, hese
en i ies o en become p i ileged ehicles o go e nmen
agendas (Bozec e al. 2002;Ho ne 2022). Thus, he e a e
184 —J. Blažek and A. Lypianin: Mili a y con lic s and he pe o mance o s a e-owned en e p ises
nume ous economic and non-economic easons o s a e
owne ship, and SOEs can pu sue impo an non-comme -
cial p io i ies (Kowalski e al. 2013).
Ano he line o a gumen a ion c i iques he na ow
concep ualiza ion o SOEs pe o mance solely in e ms o
e iciency and p ofi abili y in compa a i e s udies, which
dis ega ds he b oade social, poli ical, o s a egic objec-
i es o SOEs which encompass addi ional cos s (Bozec e al.
2002;Ho ne 2022). SOEs end o ha e longe in es men
ho izons compa ed o p i a e fi ms, which a e o en p es-
su ed o p io i ize sho - e m p ofi maximaliza ion (Le
e al. 2023), d i en by he sha eholde - alue pa adigm
(Milbe g 2008). Consequen ly, SOEs may be be e posi-
ioned o unde ake iskie long- e m in es men s, such as
majo R& D en u es. This aligns wi h a s ong commi -
men o de eloping inno a i e capabili ies h ough di ec
go e nmen in e en ion in ca ching-up coun ies (Le e
al. 2023). Ne e heless, SOEs pe o mance is ypically mea-
su ed using he same me ics as p i a e fi ms, emphasizing
p ofi abili y and p oduc i i y, hus dis ega ding hei dis-
inc and o en mul iple manda es.
I ollows hen ha s udies on he economic pe o -
mance o SOEs a e unlikely o a i e a a gene al conclusion,
and a subs an ial le el o g anula accoun ing o specific
ac o s is needed. One migh assume, o example, ha
in imes o economic and/o poli ical ha dship, SOEs, due
o hei poli ical, social, de elopmen al, o s a egic goals,
migh benefi om hei p i ileged access o a ious o ms
o go e nmen al suppo and, consequen ly, ends in he
economic pe o mance o s a e-owned and p i a e fi ms
may di e (Lazza ini and Musacchio 2018).
Indeed, se e al s udies ha e in es iga ed he specific
ad an ages enjoyed by SOEs which migh boos hei pe o -
mance such as di ec subsidies, s a e gua an ees and loans,
p e e en ial egula o y ea men – including a p io i y
access o public ende s – and exemp ions om an i us
p o isions o bank up cy ules (Le e al. 2023). O he ad an-
ages may be mo e in angible. Pa icula ly in coun ies
wi h weak ins i u ional amewo k, whe e he p o ec ion o
p ope y igh s may hinge on fi m’s s a us and e en cou
ulings and en o cemen a e con olled by poli icians who
may a ou fi ms wi h s ong connec ion o s a e o icials,
SOEs migh acc ue significan benefi s Li and Xia (2008).
On balance, SOEs a e suscep ible o specific ac o s ha
con ibu e o hei ine iciency and unde pe o mance. Li
and Xia (2008) claimed ha SOE manage s o en assume
dual oles, ac ing no only as agen s o he in es o s bu
also as s a e o icials, which may lead he pu sui o o e -
ambi ious o was e ul p ojec s (Li and Xia 2008). In addi ion,
i is impo an o acknowledge subs an ial he e ogenei y
among SOEs in e ms o hei beha iou . Fo example, Jones
and Zou (2017) documen ed cases whe e ce ain Chinese
SOEs ecklessly pu sued p ofi while sys ema ically iola -
ing Chinese egula ions, esul ing in majo ailu es such as
he e mina ion o a la ge ongoing in e na ional p ojec s.
The e o e, cu en ly, one can obse e con o e sy
ega ding hepe o manceo SOEsincompa ison op i a e
fi ms. This con o e sy can p ima ily be a ibu ed o wo
undamen al ac o s. Fi s ly, he sha p a ia ion and ongo-
ing e olu ion o he indus ial, socioeconomic, and ins i u-
ional con ex s in which SOEs ope a e (Es in e al. 2019).
Secondly, esea ch compa ing he economic pe o mance
o SOEs wi h hei p i a e coun e pa s o en o e looks he
b oade objec i es o SOEs beyond he na ow ocus on
sho - e m p ofi .
2.2 Posi ion and alue cap u e o SOEs in
global alue chains/global p oduc ion
ne wo ks (GVCs/GPNs)
While he s a e sec o has adi ionally been an impo an
elemen in many economies, whe he eme ging o he mos
ad anced (Jones and Zou 2017;Kowalski e al. 2013), he
in ol emen o SOEs in GVCs/GPNs and specifically hei
posi ioning wi hin alue chain hie a chies emains la gely
undocumen ed and hus ep esen s a gap in ou comp e-
hension o global p oduc ion (Ho ne and Al o d 2019). This
is un o una e conside ing ha SOEs ope a e in a numbe o
key indus ies, such as mining, manu ac u ing, public u ili-
ies, and financial ins i u ions (Cue o-Cazu a e al. 2014;
Ho ne and Al o d 2019), and ha e p og essi ely become
mo e in ol ed in in e na ional ade o e he las ew
decades (Kowalski e al. 2013). Fo ins ance, h ee qua e s
o Chinese fi ms lis ed in he Fo une 500 we e SOEs (Jones
and Zou 2017). Likewise, Beni o e al. (2016), based on an
in es iga ion o lis ed No wegian fi ms, confi med global
ambi ions o SOEs and hei abili y o benefi om in e na-
ionaliza ion due o go e nmen - ela ed ad an ages. Babic
(2021)a gued ha a hand ulo powe uls a es,mo i a edby
amixo p ofi , echnology,and s a egiccon ol,a einc eas-
ingly acqui ing o eign fi ms, es ablishing s a e-owned sub-
sidia ies ab oad, and engaging in po olio in es men s in
global financial ma ke s. This end leads o a wide a ie y
o ways o s a es o con ol and mo e eno mous amoun s
o capi al ac oss he globe. This con as s wi h a mo e
adi ional belie ha SOEs a e p ima ily o ien ed owa d
domes icma ke s(Cue o-Cazu ae al.2014;Kowalskie al.
2013).
Global alue chains/global p oduc ion ne wo ks a e
go e ned by lead fi ms ha c ea e, sus ain, o eshape end
J. Blažek and A. Lypianin: Mili a y con lic s and he pe o mance o s a e-owned en e p ises —185
ma ke s (Yeung and Coe 2015). Lead fi ms engage nume -
ous supplie s ha can be a anged in o se e al ie s based
on he le el o p oduc ion sophis ica ion (Thobu n and
Takashima 1992). Gene ally, highe - ie supplie s ea u e
specialized asse s and specific know-how, which makes
hem aluable pa ne s o lead fi ms (Coe and Yeung
2015). Lowe - ie supplie s o en secu e la ge- olume p o-
duc ion while pe o ming ew unc ions o highe alue
added (Pa línek and Ženka 2016). They ely p edomina ely
on gene ic asse s and only a ely employ unique know-how
(Coe and Yeung 2015), which makes hem ulne able as
hey can be eplaced by ye cheape supplie s (Bai and
We ne 2011). Consequen ly, di e ing supplie capabili ies
and asse s a e likely o ansla e in o alue c ea ion and,
especially, he le el o alue cap u e (Pa línek and Ženka
2016;Shin e al. 2012,2017).
While any fi m engaged in a GVC/GPN is a si e o alue
c ea ion – defined as he gene a ion o an economic su plus
o e he cos s o a gi en economic ac i i y – i is he alue
cap u e ha is he mos impo an om a egional de el-
opmen pe spec i e (Coe 2021). Value cap u e is defined as
he abili y o fi ms o e ain su plus in hei o ganiza ional
bounda ies wi hin he powe dynamics o p oduc ion ne -
wo ks and, hence, is a dynamic a he han s a ic a ibu e
(Coe 2021). Ne e heless, he le el o alue cap u e is o en
seen as ela ed o he posi ion o a fi m wi hin he p o-
duc ion hie a chy, which consequen ly ansla es in o one
o he key policy implica ions o he GVC/GPN app oach,
ha is, o “mo e up he chain”, o o unc ionally upg ade
(Pananond 2016). Howe e , Coe (2021) a gues ha linea and
de e minis ic pleas o unc ional upg ading dis ega d he
wide ange o shi ing alue cap u e ajec o ies, including
downg ading dynamics.
Thus, he e is no ag eemen in he li e a u e abou he
na u e o he ela ionship be ween he posi ion o fi ms
in alue chains and hei alue cap u e, and e en less so
in ela ion o he owne ship o en e p ises (s a e e sus
p i a e). This disag eemen is a ibu able o a ple ho a o
specific ea u es in a fi m, including owne ship (s a e, p i-
a e, o eign, o mixed), managemen skills and ambi ion,
alue chain (p oduce - o buye -d i en; quasi-hie a chical,
modula , ne wo ked; expanding o e ea ing indus y), and
hos egion (leading, de eloped, le -behind, unde de el-
oped, e c.).
While he economic pe o mance o fi ms can be p i-
ma ily assessed h ough e olu ion o p ofi abili y and e -
enues, he e is no consensus in he li e a u e on measu e-
men o alue cap u e by indi idual en e p ises (Pa línek
and Ženka 2016). We sugges ha he indica o selec ion o
alue cap u e by indi idual fi ms should, fi s , eflec hei
abili y o de elop and/o augmen hei asse s as ecom-
mended by he esou ce-based heo y o he fi m (We n-
e el 1984). Second, indica o s o alue cap u e should
acc ue he benefi s by which he fi m con ibu es o he
hos egion (coun y) (Coe 2021). Thus, he alue cap u ed by
fi ms can be s uc u ed acco ding o se e al scales – fi m,
egion, and coun y. Thus, we concu wi h Bowman and
Amb osini (2000) ha alue cap u e is a unc ion o he
esou ces/asse s possessed by fi ms as well as o hei ex e -
nal ela ionship wi h supplie s and cus ome s as concep u-
alized by he GVC/GPN s eam.
Consequen ly, based on his and exis ing esea ch
(Blažek and Holická 2022;Pa línek and Ženka 2016)aswell
as eflec ing he da a a ailabili y, we will use he ollowing
indica o s omeasu e alue cap u e: pe sonnel cos s, dep e-
cia ions, co po a e axes (all hese indica o s ela i ized o
e enues), and a e age wages. These indica o s (excep co -
po a e axes) eflec he abili y o en e p ises o enhance
hei own asse s, while co po a e axes indica e he con i-
bu ion o fi ms in building egional (na ional) asse s. Thus,
co po a e axes ep esen alue ha is cap u ed di ec ly by
he public adminis a ion in a gi en e i o y (s a e) and
exempli y con ibu ions ha fi ms make o b oade socie y.
Pe sonnel cos s cap u e fi m in es men s in human
esou ces. Ine i ably, and especially, ained, skilled, and
knowledgeable human esou ces easily mo e o o he
en e p ises in he egion (o beyond). Thus, in es men s by
fi ms in o hei human esou ces can enhance – a leas o
a ce ain ex en – a egion’s human asse s. Mo eo e , om
a egional de elopmen pe spec i e, i can be a gued ha a
subs an ial sha e o pe sonnel cos s ends o be spen wi hin
he egion, hence ep esen ing an impo an mul iplie o
he egional economy. To dis inguish be ween fi ms ha
employ a la ge amoun o low-paid labo and hose ha ely
ona lowe numbe o well-paid employees(inbo h cases he
sha e o pe sonnel expendi u es on u no e can be high),
his indica o will be combined wi h he a e age wage le el.
Finally, dep ecia ions ep esen an indica o o capi al and
he echnological in ensi y o p oduc ion.
The e o e, his a icle aims o con ibu e o he li e a-
u e by in es iga ing how he economic pe o mance and
alue cap u e o fi ms – classified by owne ship and hei
posi ion in GVCs/GPNs – ha e e ol ed due o ab up wo s-
ening o he geopoli ical and economic si ua ion caused
by Russia’s occupa ion o pa s o Donbas and C imea in
2014. Consequen ly, we would like o answe he ollow-
ing esea ch ques ions. Fi s , wha a e he p ima y di -
e ences in he dis ibu ion o s a e-owned, o eign, and
p i a e en e p ises in he Uk ainian ae ospace, de ense,
and elec o-enginee ing indus ies wi hin he hie a chy o
186 —J. Blažek and A. Lypianin: Mili a y con lic s and he pe o mance o s a e-owned en e p ises
p oduc ion ne wo ks? Second, wha a e he di e ences in
e enues, p ofi s alue cap u e, and expo and impo
among fi ms based on owne ship (s a e-owned, o eign, p i-
a e) and hei posi ion in GVCs/GPNs (lead fi ms, Tie 1,
Tie 2, and Tie 3 supplie s), and how ha e hese di e ences
e ol ed ac oss he pe iods 2010–13 and 2016–20?
3 Key ea u es o Uk ainian
ae ospace, de ense, and
elec o-enginee ing indus ies
Uk ainian ae ospace, de ense, and elec o-enginee ing
indus ies ha e been selec ed o examina ion o se e al
easons. Fi s ly, hese indus ies a e echnologically ela ed
and ha e a dis inc adi ion in Uk aine, achie ing in e na-
ional excellence in specific ma ke segmen s. Fo example,
in he la e 1980s, he Kyi -based fi m An ono de eloped
and manu ac u ed he wo ld’s la ges ca go plane, he An-
225 (M iya). Secondly, gi en he cu en geopoli ical si ua-
ion, hese indus ies play a i al ole. Thi dly, hey ha e
been la gely o e looked in he main esea ch ocus o
GVC/GPN esea che s.
Uk aine had become one o he key indus ial cen e s
o he Russian empi e ha specialized in labo -in ensi e
hea y indus ies (coal and o e mining, me allu gy, mechan-
ical enginee ing, e c.) du ing he Indus ial Re olu ion.
Th oughou he So ie pe iod, which o Uk aine s a ed in
1921 and las ed un il he dissolu ion o he USSR in 1991,
he Uk ainian economy was subjec ed o he p inciples o
a command economy: fi ms we e na ionalized and o eign
capi al in es men s we e banned (Ma se a yi 2009).
Du ing he Cold Wa pe iod, he Uk ainian ae ospace
and de ence indus ies we e ully in eg a ed in o he
So ie and Wa saw Pac p oduc ion sys ems, which ap io i
excluded all di ec con ac s wi h Wes e n GPNs. A e he
collapse o he So ie Union, mos p oduc ion p ojec s wi h
Wes e n coun ies o associa ed wi h global GPNs occu ed
wi hin mul ila e al coope a ion. Fo example, in he case
o he fi s s age o No h op G umman’s An a es ocke
Uk aine p o ided he p opellan anks and plumbing (Ha -
wood 2023).
The dissolu ion o he So ie Union in 1991 esul ed
in economic malaise ac oss he whole pos -So ie space,
including Uk aine (Holo ko 2003). The coun y’s go e n-
men pu sued a policy o fi m p i a iza ion; howe e ,
in con as o o he Eas e n Eu opean coun ies, o eign
in es men s we e discou aged. Ne e heless, due o hei
s a egic na u e, mos impo an fi ms in de ense and
ae ospace emained unde s a e owne ship and we e, in
2010, in eg a ed in o he s a e conglome a e Uk obo on-
p om (Dub o skiy 2007).
A e 1991, he fi ms in examined indus ies ended
o pu sue h ee majo s a egies. Fi s , mos fi ms con-
inue o collabo a e wi h o he s ac oss pos -so ie coun-
ies (Kyzym and Miliu in 2018;Romanukha 2014). Second,
fi ms ocus on epai ing and upg ading p oduc s expo ed
ab oad be o e he dissolu ion o he So ie Union (She so
and Bonda chuk 2013). Thi d, some ae ospace and elec o-
enginee ing fi ms eo ien ed hei expo s ou side he o -
me So ie Union.
The Russian agg ession in 2014 hea ily a ec ed he
whole Uk ainian economy and led o displacemen o 3.3
million people (Mykhnenko 2020). In Augus 2014, Uk aine
imposed an emba go on he expo and impo o mili-
a y and dual-use goods o and om Russia. Since hen,
Uk ainian fi ms ha e ocused on finding al e na i e sup-
plie s domes ically and ab oad, as well as secu ing new
expo ma ke s in Eu ope and Asia (Blažek and Lypianin
2024;Ilchenko e al. 2021). Se e al highe - ie supplie s
ha e downg aded hei manu ac u ing ac i i ies, ocusing
on less sophis ica ed goods, especially in he p oduc ion
o final p oduc s. Fo ins ance, An ono , Uk aine’s leading
ai c a manu ac u e , was o ced o cease final assembly
o ai c a . In esponse, An ono eo ien ed i s ope a ions
owa d he epai and mode niza ion o olde ai c a se -
ing in a ious coun ies and also launched he p oduc-
ion o unmanned ae ial ehicles (UAVs). Simila ly, Yuzh-
mash, Uk aine’s o emos space ocke manu ac u e , had
o comple ely s op ocke assembly due o he loss o Rus-
sian cus ome s o i s flagship Zeni h p ojec . Many en e -
p ises we e compelled o educe hei p oduc ion olumes
and nea ly ceased expo s du ing he 2016–2020 pe iod, as
finding al e na i e expo ma ke s p o ed challenging –
despi e he exis ence o s a e-owned dedica ed specialized
ade s – pa ly due o eliance on (pos )-so ie echnolog-
ical pla o ms, mos o which a e incompa ible wi h hei
Wes e n coun e pa s. In 2022, he Uk ainian go e nmen
es ablished he De ense P ocu emen Agency o adop NATO
s anda ds o anspa ency, educe co up ion isks, and
add ess challenges in impo ing mili a y ha dwa e ha
a ose wi h he exis ing specialized ade s, who ha e p e-
domina ely ocused on expo ansac ions (Me eshchuk
2022).
The si ua ion wo sened subs an ially a e Russia
launched i s ull-scale in asion in Feb ua y 2022. The pe sis-
en h ea o c uise missiles and long- ange loi e ing muni-
ion o ced Uk ainian de ense p oduce s o dispe se hei
ope a ions ac oss he coun y and e en cons uc new ac-
o ies unde g ound (Rojas 2024). Domes ic manu ac u ing
J. Blažek and A. Lypianin: Mili a y con lic s and he pe o mance o s a e-owned en e p ises —187
o mili a y d ones has expanded so apidly ha i now con-
s i u es a dis inc b anch wi hin Uk aine’s de ense indus y
(Balasho a 2024). Ae ial d ones a e now ex ensi ely used on
he on lines o a ious pu poses, including eal- ime ac-
ical in o ma ion ga he ing and a ille y a ge ing, o e en
subs i u ing o a ille y al oge he . The combina ion o mis-
sile s ikes and emo e-con olled d one boa s laden wi h
explosi eshasinflic edsignifican damageonRussia’s Black
Sea flee , ul ima ely o cing i s wi hd awal om C imea
(Tho ne 2024).
While Uk aine con inued o expo i s de ense p oduc-
ion a e he occupa ion o C imea (Blažek and Lypianin
2024), he si ua ion changed d ama ically ollowing he ull-
scale Russian in asion in Feb ua y 2022.Since hen, Uk aine
has s opped he expo o mili a y p oduc s and has become
he wo ld’s ou h-la ges a ms impo e (Wezeman e al.
2024). The wa also led o he es ablishmen o in ensifica-
ion o coope a ion especially wi h Eu opean de ense en e -
p ises. Majo Eu opean manu ac u e s such as Rheinme all,
KNDS, BAE Sys ems, and o he s ha e exp essed in en ions
o es ablish subsidia ies in Uk aine, p ima ily o ensu e he
epai and main enance o p e iously supplied ha dwa e.
One no able example o his coope a ion is he adap a ion o
he So ie -e a SU-24M ac ical bombe o accommoda e he
Wes e n S o m shadow/Scalp-EG ai -launched c uise mis-
siles de eloped by MBDA (De ense Exp ess 2024).
4 Me hodological app oach
Fi s , we c ea ed a da abase o fi ms in h ee selec ed indus-
ies. We u ilized he se ices o he Uk ainian da abase
p o ide YouCon ol2and iden ified he fi ms using he
Na ional Classifica ion o Economic Ac i i ies codes 27.1,
27.2, 28.1, 30.3, 30.4, and 25.4. These co espond o he
manu ac u e o elec ic mo o s, gene a o s, ans o me s,
ba e ies, gene al-pu pose machine y, ai and spacec a
machine y, mili a y ehicles, weapons, and ammuni ion.
Addi ionally, we examined he websi es o ela ed indus-
ial associa ions as well as Uk ainian ade ai epo s
so as o also include fi ms manu ac u ing ele an p od-
uc s bu classified unde a di e en indus ial code(s). This
me hod allowed us o iden i y nea ly a housand fi ms. We
hen examined each one o e i y hei ele ance o ou
s udy, excluding inac i e, bank up , o insol en fi ms as
well as mic o-en e p ises wi h ewe han 10 employees.
Fi ms loca ed in occupied pa s o Donbas and C imea we e
excluded, educing he lis o 329 fi ms. Among hese, we
2h ps://youcon ol.com.ua/en.
selec ed 125fi ms ha had comple e in o ma ion abou hei
economic pe o mance du ing he in es iga ed 2010–20
pe iod in he YouCon ol da abase. We had o exclude 9
fi ms wi h un eliable alues, such as ze o expendi u es
on pe sonnel cos s. Then we collec ed da a on owne ship
(s a e-owned, p i a e, and o eign), key economic indica o s
including he numbe o employees, and expo and impo
de ails ca ego ized by indi idual coun ies. F om he fi ms’
web pages o annual epo s, we exce p ed da a on he
ypes o goods p oduced o de e mine hei posi ion in he
p oduc ionhie a chyand he le el o di e sifica ion o hei
p oduc ion. This in o ma ion was no a ailable o 11 en e -
p ises, so ou final se consis s o 105 fi ms (Table 1). Gi en
he ela i ely limi ed size o he final sample and he dis-
inc ions be ween fi ms in he ae ospace/de ense indus ies
compa ed o elec o-enginee ing en e p ises, ou analysis is
p ima ily desc ip i e. We ca ego ized hese fi ms in o lead
fi ms and Tie 1, 2, and 3 supplie s using a me hodology
de eloped by Pa línek and Janák (2007). Thei me hodology
es s on assigning fi ms in o ie s acco ding o he mos
sophis ica ed p oduc (s) hey manu ac u e. To illus a e he
way we assigned fi ms in o ie s, Table 1 p o ides examples
o p oduc s ypical o pa icula ie s in each indus y. We
also classified fi e s a e-owned specialized ade s ha con-
ol mos o he wa a e and double-use p oduc s expo s as
a sepa a e fi m ca ego y.
Le el o di e sifica ion was in es iga ed o accoun o
di e en powe ela ionshipbe weencus ome sand suppli-
e s beholden o one ne wo k and supplie s wi h mo e di e -
sified cus ome base. In his exe cise, we u ilized expe ience
gained du ing ou p e ious esea ch (Blažek and Lypianin
2022) and benefi ed om he ac ha en e p ises end
o publicize he in o ma ion abou hei key cus ome s on
hei web pages o enhance hei image (I a sson and Al s-
am 2011). We classified en e p ises in o h ee ca ego ies: i)
hose se ing p edomina ely a single p oduc ion ne wo k
(low di e sifica ion), ii) fi ms supplying wo ne wo ks, o
one p oduc ion ne wo k and he final ma ke (medium
di e sifica ion), and iii) fi ms se ing h ee o mo e p oduc-
ion ne wo ks (high di e sifica ion). We acknowledge ha ,
e en hough he examina ion o web pages o indi idual
en e p ises is ime-consuming, he abo e classifica ion o
en e p ises can only be conside ed app oxima e.
Based on mac oeconomic ends and he shi ing
geopoli icalcon ex , he ollowing wope iodswe eselec ed
o ou analysis. The fi s pe iod, 2010–13, ep esen sa sho
phase o ela i e p ospe i y and s abili y a e he 2008–9
global financial c isis. The yea s 2014–15 ep esen a pe iod
o disa ay caused by he Russian annexa ion o C imea and
he occupa ion o pa o Donbas. The e o e, his pe iod
was excluded om ou analysis. Consequen ly, he second
188 —J. Blažek and A. Lypianin: Mili a y con lic s and he pe o mance o s a e-owned en e p ises
Table 1: Typology o componen s used o classi ica ion o supplie s in o ie s.
Ca ego y Ae ospace De ense Elec o-enginee ing
Lead i ms – assembly o end
p oduc s
Ai planes, helicop e s, d ones, ocke
launch sys ems, sa elli es
Tanks, in an y igh ing ehicles,
mul iple launch ocke sys ems
Nuclea /classic s eam supply sys ems,
u bine halls, hyd o/wind/cogene a ion
powe plan equipmen , pho o ol aic
modules, ansmission, dis ibu ion g ids
Tie – design and p oduc ion
o de ices/modules
Engines, uselages, wings, chassis,
dashboa ds
Engines, body ames, chassis,
cannons
Reac o s, u bines, gene a o s, boile s,
pho o ol aic collec o s, powe
ans o me s, ene gy s o age
Tie – p oduc ion o module
and sub-sys em componen s
Rada s, na iga ion equipmen ,
measu ing de ices, pa s o engines,
wings, and uselages, sea s, pa s o
galleys
Rada s, na iga ion equipmen ,
measu ing de ices
Pumps, coolan sys ems and con ol
elemen s, uel ods, au oma ion
equipmen , bu ne s, s a o s, o o s,
blades, gea boxes, polysilicon wa e s,
dis ibu o s, high ol age owe s,
ans o me s, ba e ies
Tie – p oduc ion o Va ious me al, plas ic, and chemical componen s: dis ibu o s, cable bundles, cu en limi e s, u bine paddles, al es,
ela i ely low alue-added en ila ion equipmen , high-p essu e essels, ga es, polysilicon, connec ion boxes, insula o s, conduc o s,
componen s con e e s, ci cui b eake s, chokes, swi che s, de ec o s, sola glass, anks, me al pa s and specialized a ma u es.
Sou ce: Adap ed om Blažek and Lypianin (2024).
analyzed pe iod co e s he yea s 2016–20, when Uk ainian
fi ms had o adap o a new geopoli ical si ua ion caused by
Russian agg ession s a ing in 2014.
To in es iga e he le el o alue cap u e by indi idual
fi ms and, subsequen ly, acco ding o owne ship and ie ,
all h ee indica o s o alue cap u e we e ela i ized o e -
enues. In each fi m, he sha e o pe sonnel cos s in e enues
was adjus ed by he le el o a e age wages paid by a fi m o
accoun o di e ences in labou qualifica ions. The e o e,
he alue o pe sonnel cos s was mul iplied by an index
Pi =Wi/Wa.
Wi – a e age wage in a fi m in a gi en pe iod.
Wa – a e age wage in ei he ae ospace/de ense indus-
ies o in elec o-enginee ing fi ms in a gi en pe iod.
Then, he sha e o axes o e enues was weigh ed by a
ac o o 3 (as paid axes a e di ec ly cap u ed by he s a e),
he sha e o dep ecia ions on e enues ( eflec ing he capi-
al in ensi y o p oduc ion) by a ac o o 2, and he sha e o
pe sonnel cos s emained wi h weigh 1. O he wise, wi hou
assigning weigh s, he le el o alue cap u e would be, o a
decisi e ex en , de e mined by he sha e o pe sonnel cos s.
5 Empi ical analysis esul s
5.1 Dis ibu ion o s a e-owned, p i a e, and
o eign i ms wi hin he p oduc ion
ne wo k hie a chy
In he empi ical sec ion, we fi s examine he dis ibu-
ion o SOEs wi hin p oduc ion ne wo ks, which emains
la gely undocumen ed in he GVC/GPN li e a u e (Ho ne
and Al o d 2019). We ocus specifically on how he dis i-
bu ion pa e ns o s a e-owned, o eign, and p i a e en e -
p ises di e be ween he p oduc ion ne wo ks o Uk ainian
ae ospace and de ense indus ies on he one hand, and
elec o-enginee ing indus y on he o he . O e all, signifi-
can di e ences in he dis ibu ion o SOEs, p i a e, and
o eign en e p ises ha e been obse ed acco ding o mul-
iple dimensions (Table 2). SOEs comple ely occupy he
niches o specialized ade s and domina e also among lead
fi ms in ae ospace/de ense indus ies. In con as , in he
elec o-enginee ing indus y, p i a e fi ms p e ail in all
ie s (excep o a single lead fi m which is s a e-owned)
as well as among fi ms ope a ing p ima ily ou side GPNs.
No ably, he p esence o SOEs in he elec o-enginee ing
indus y compa ed o ae ospace and de ense indus ies
is mino , which eflec s he s a egic na u e o he la e
indus ies. Thus, ou findings confi m he a gumen ha
SOEs end o ha e a s ong p esence in economies, pa icu-
la ly in s a egic indus ies, whe e hey a e also posi ioned
a key nodes wi hin p oduc ion ne wo ks (Shapi o e al.
2018).
5.2 Shi s in economic pe o mance and
alue cap u e o i ms based on
owne ship, ie , and he le el o
di e si ica ion be ween he wo pe iods
Nex , we in es iga e he di e ences in e enues, p ofi s,
impo , expo , and alue cap u e among fi ms based on
J. Blažek and A. Lypianin: Mili a y con lic s and he pe o mance o s a e-owned en e p ises —189
Table 2: Uk ainian s a e-owned and p i a e en e p ise dis ibu ion wi hin he p oduc ion hie a chy.
Indus y Owne ship Specialized ade s Lead i m Tie 1 Tie 2 Tie 3 Ou side GPN To al
Ae ospace and De ense S a e 3 2 9 5 8 22 49
P i a e 0 0 2 7 4 7 19
Fo eign 0 0 0 2 2 1 5
To al 3 2 11 13 14 30 73
Elec o-enginee ing S a e 0 1 2 1 0 1 4
P i a e 0 0 3 11 1 7 23
Fo eign 0 0 2 2 1 5
To al 0 1 7 14 932
To al
Sou ce: own.
owne ship, hei posi ion in GVCs/GPNs,and how ha e hese
di e encese ol edac oss he pe iods 2010–13and2016–20.
As a consequence o he sudden majo ex e nal shock
caused by he 2014 Russian in asion, he decline in en e -
p ise p ofi s be ween he wo pe iods was e en s eepe
han he decline in e enues (Tables 3 and 4). The e -
enue decline was less se e e o en e p ises in ae ospace
and de ense compa ed o elec o-enginee ing fi ms (65.4 %
e sus 47.6 %). This di e ence eflec s he s a egic impo -
ance o he o me indus ies and he esul ing s onge
s a e suppo o hese fi ms. Acco dingly, SOEs in he
ae ospace/de ense indus ies pe o med ela i ely well,
wi h hei annual e enues dec easing ‘only’ o 69.9 %, su -
passing bo h Uk ainian p i a e and o eign en e p ises,
which su e ed d ops o 60.1 and 44.6 %, espec i ely. Mo e-
o e , SOEs in he ae ospace and de ense indus ies managed
o inc ease hei a e age annual EBITDA o 129.5 % o he
2010-13 le el, which is ema kable conside ing he decline
in e enues. Re enues o lead fi ms and Tie 1 suppli-
e s d opped significan ly mo e han hose o lowe - ie
supplie s, as hey we e mo e se e ely impac ed by legal
es ic ions on ade in sensi i e indus ies wi h Russia
ollowing he 2014 e en s, compa ed o lowe - ie suppli-
e s p oducing less specialized p oduc s o in e media e
ma ke s.
These findings highligh he ma kedly une en le el o
public suppo ac oss di e en owne ship ypes and indus-
ies, wi h SOEs in he ae ospace and de ense indus ies
ecei ing p io i y. Thus, while he p e ailing consensus in
he li e a u e is ha SOEs o en exhibi lowe e iciency and
p ofi abili y (Li and Xia 2008), he e a e impo an specific
cases ha p o e o he wise.
Table 3: Re enues, p o i s, expo and impo in ae ospace and de ense indus ies based on owne ship in 2010–13 and 2016–20 pe iods (sum, mln.
USD).
Re enues P o i s Expo Impo Numbe o i ms
2010–13 2016–20 2010–13 2016–20 2010–13 2016–20 2010–13 2016–20 2010–13 2016–20
Tie Spec. T ade s 306.8 279.4 16.0 10.9 242.6 277.4 42.1 21.4 3 3
Lead i m 421.1 254.0 27.1 29.8 64.8 45.9 122.3 17.4 2 2
1.- ie 1,332.9 753.6 232.0 110.6 892.9 504.3 515.9 99.9 11 11
2.- ie 192.2 193.9 12.2 17.2 71.5 377.3 18.3 5.3 13 13
3.- ie 231.0 163.1 12.5 4.4 39.6 469.4 20.3 11.6 14 14
No in ol ed 201.6 111.1 10.5 5.7 35.6 22.5 19.3 1.4 30 30
Owne ship S a e 1,589.5 1,111.6 77.3 100.1 605.6 368.8 342.2 59.4 49 49
P i a e 999.8 600.6 233.3 77.7 692.5 484.0 379.5 94.3 19 19
Fo eign 96.4 42.9 −0.3 0.8 48.8 16.4 16.6 3.4 5 5
Le el o di e -si ica ion Low 1,393.7 969.6 60.3 91.2 523.8 33.7 330.7 48.1 39 39
Medium 1,220.3 741.8 248.8 86.3 788.3 835.5 402.8 106.0 26 26
High 71.6 43.7 1.2 1.1 34.8 19.6 4.7 3.0 8 8
Size Medium 99.7 61.6 8.3 2.7 50.3 14.5 6.5 11.6 22 25
La ge 2,585.9 1,693.5 302.0 175.8 1,296.6 22.6 731.7 145.4 51 48
To al ,. . . . ,. . . .
∗Sou ce: au ho s’ calcula ion based on YouCon ol Da abase.
