The Unseen Reason Behind the Boom in the Defense Industry

Although it is one of the most important keys to understanding the boom in the Turkish defense industry over the past 15 years, there is one aspect that is rarely discussed.

It Wasn’t About Technology, It Was About Governance

To put it in academic terms, this issue concerns the changing civil-military relations in Turkey and the impact of this transformation on the governance of the defense industry.

Simply put, when management moved away from the traditional military approach and adopted a civilian-technical approach, the entire sector changed.

The idea here is not that soldiers are monsters or civilians are smarter, but that you cannot manage a sophisticated, high-risk technology industry geared toward the global market with the same mindset as a hierarchical military institution whose primary goal is to meet the needs of the domestic army.

The Industry Born After the Embargo: The Dominance of Military Logic

To understand this transformation, we need to go back a little.

Major companies in the Turkish defense industry, such as Aselsan and TAI, were established in the 1970s, entirely within a political context, following the shock of the US arms embargo after the 1974 Cyprus crisis and the Turkish awareness that being completely dependent on the West was a strategic risk.

Aselsan was established in 1975 as a direct response to this embargo. From the outset, it was affiliated with the Turkish Armed Forces.

TAI was established slightly earlier, but it acquired a larger industrial structure in the 1980s when it partnered with American companies to produce and assemble F-16s.

In other words, both companies were part of the defense industrialization project, but this project was closely linked to military institutions and the urgent needs of the armed forces.

These companies were under the influence of institutions controlled by the military, and the presence of retired military personnel on the companies’ boards of directors and in senior positions was evident.

Low Risk, Low Innovation, Closed Ecosystem

This situation naturally manifested itself in the management culture: conservative management, low risk, a focus almost entirely on meeting the needs of the Turkish military, and a heavy reliance on licensed production or limited development.

Why Can’t Military Institutions Be Global Players?

This is not my personal opinion. In management and innovation studies, there is a well-known logic that governance and decision-making styles directly affect the level of innovation, risk-taking, and long-term commercial thinking.

When managing a defense company with a closed, sovereign institution mindset, it is natural to produce for the domestic market, but it is difficult to remain a global player that exports, innovates, and negotiates.

Therefore, although Turkey’s defense industry structure has existed for approximately 50 years, the growth of this sector has remained limited for a long time. Until the beginning of 2010, exports in the defense and aerospace industry were still below $1 billion and progressing very slowly compared to the country’s goals at the time.

The State’s Transformation from Sole Buyer to Strategic Actor

The real transformation did not happen overnight, but it began to gain momentum rapidly from 2004 onwards.

The state became not just the sole buyer of this sector, but its strategic buyer. It increased research and development spending and opened the door for private and semi-private companies to enter a sector that had previously been almost closed.

2016: A Turning Point for the Defense Industry

However, the failed coup attempt in 2016 became a turning point in accelerating this process, as it allowed for a radical realignment of the balance of power within the state, including the defense industry sector.

After 2016, a crucial step was taken to reattach the Defense Industry Presidency (SSB) directly to the Presidency.

This decision achieved three things simultaneously. It decentralized the decision-making process by removing it from traditional military institutions.

It accelerated the ability of decision-makers to change leadership within companies and institutions.

And it created a kind of harmony and understanding between the defense industry, foreign policy, and the state’s geopolitical goals.

New Generation Manager Profile: Not a Soldier, but an Industrialist

This paved the way for a new generation of civilian-technical leaders with experience in management, economics, engineering, and aviation.

The most obvious example of this transformation is Temel Kotil from Turkish Airlines, a global civilian company. He has been involved in competition, marketing, efficiency, and profitability, achieving great success in these areas.

When he took over the leadership of TAI after 2016, he thought not about what the army needs today, but about what the army needs today and tomorrow and what the global market can buy.

This transformation turned the sector from a closed sovereignty program into a strategic and exportable defense product.

After that, a new discourse began to emerge in Turkey, and an official slogan defining defense as an export industry emerged: defense industry for export.

During the same period, annual spending on research and development in the defense sector reached approximately $3 billion. Companies became more flexible. The focus was on efficiency, profitability, and time. A clearer network was established with the global market.

The Truth Told by Numbers and Products

All of this was reflected in the numbers. Turkey’s defense and aviation exports, which were below 1 billion dollars, reached approximately 7.2 billion dollars in 2024.

However, more important than the figures is the quality of the products: the Kaan fighter jet, the Atmaç anti-ship missile, and armed unmanned aerial vehicles that shift the balance of power on multiple fronts.

These products are certainly not a coincidence or merely a technical achievement; they are a direct result of the change in management philosophy and the state’s relationship with industry.

Four Dynamics Making Turkey an “Emerging Arms Exporter”

Many analyses classify Turkey today as an emerging country in the defense industry and attribute this transformation to four main factors that have had a combined effect.

• The marginalization of the military’s direct political role

• The rise of a central civilian leadership (SSB) controlling the strategic decision-making process

• The use of the defense sector as a hard and soft power tool in foreign policy

• Encouraging private and semi-private companies to enter the market and not limiting the market to organizations linked to the armed forces

This is a lesson for many countries that dream of reaching the level Turkey has achieved. It is not a matter of technical skill. Turkish engineers have been in this field since 1974. However, it is the management style itself that has enabled this explosion. All you have to do is leave the bread to the baker.

Why Does Military Hierarchy Kill Innovation?

From an economic perspective, why do traditional military leadership and hierarchical command structures not encourage innovation and development in the defense industry?

I previously wrote that the acceleration and development experienced in the Turkish defense industry occurred alongside a change in management philosophy. Military leaders gradually withdrew from the management of defense companies and were replaced by civilian-technical leaders with a completely different mindset.

However, to address the issue from an economic perspective and understand why the military’s hierarchical style hinders innovation, we need to understand a few simple concepts from organizational economics.

Rational Inefficiency: When No One Wants to Make Mistakes

The first theory is the principal-agent theory, which explains why people engage in behavior that is contrary to the interests of the organization.

At the core of this theory, we can view any organization as consisting of principals (top management) and agents (engineers, managers, program managers). However, the interests of these two groups are not entirely aligned.

In the traditional defense industry, the principal (management) wants innovation, speed, calculated risks, and new products.

However, if the principals (management) have a rigid military background, the agents (engineers) prioritize avoiding mistakes and punishment. They do not want to attract attention, they follow the rules, and they make zero mistakes, even if it means zero innovation.

Economically, this is called rational inefficiency, meaning representatives (engineers) work less efficiently but rationally, because incentives encourage them to conserve energy and focus solely on avoiding mistakes. This means there is literally no incentive to succeed, but making mistakes is punished.

The “Fear of Making Mistakes” Stifling Innovation

This brings us to the second concept: the theory of the Zero-Error Culture. This is the number one enemy of innovation. It is a culture that develops very naturally in any organization that punishes mistakes rather than rewarding successes. Agents (engineers) refuse to take risks… They choose the safe path, even if it is slower and weaker…

This has been the case for years in many defense companies around the world, including Turkey, since before 2004…

Imagine an organization with 300 steps for approval… and 50 signatures… and even the smallest mistake is severely punished… of course, no one will try anything new… no one will say, “Let’s try this idea, it might work…” No engineer will take a risk on an idea that might fail… even if that idea could change the industry…

Getting Lost in Pursuit of Perfection

This brings us to Incentive Theory. According to this theory, if there is no reward for innovation, innovation will not happen. In other words, people do not do what they should do, they do what the system rewards.

If military management rewards discipline, avoiding mistakes, obeying orders, and completing procedures, then you will see projects that follow only a slow bureaucratic philosophy, where engineering teams are afraid to experiment, with outdated ideas and slow progress.

Innovation requires an environment that fosters risk-taking and experimentation. However, the military system is designed not to manage risk but to minimize it.

This brings us to the logic of perfect optimization, or the Perfect Optimization Trap. In the traditional defense industry, there is a well-known disease: we want the best thing in the world. A flawless first version. Economists call this the pursuit of perfection under bureaucratic constraints, and it is the main reason why 80% of European armament projects are delayed.

Because you want every project to be perfect, every specification must meet the highest international standards, and every change must pass through 10 review committees. As a result, reaching the final product takes 10 years instead of 2.

This is completely contrary to innovation, because innovation happens step by step and through iterations, but traditional military thinking demands success on the first try.

Innovation Comes Not from Orders, but from Freedom

In any technology industry, risk is part of the game. Innovation does not come from fear, discipline, following orders, long reports, and sequential approvals. Innovation requires freedom to make decisions, take responsibility for experiments and failures, and reward success. It requires a culture of learning through trial and error, which is the opposite of the traditional military environment.

Therefore, when civilian leadership entered the Turkish defense industry, the margin for initiative increased, and innovation quickly followed.