Resource title

Corporate governance, innovation and competitive performance in the commercial turbofan industry: the case of Rolls-Royce

Resource image

image for OpenScout resource :: Corporate governance, innovation and competitive performance in the commercial turbofan industry: the case of Rolls-Royce

Resource description

Three companies - General Electric, Pratt and Whitney, and Rolls-Royce - effectively control the global markets for commercial aircraft engines. For some time observers of the industry have expected that one of the Big Three would eventually be forced to withdraw from the industry, and at the beginning of the 1990s, it appeared that the British-based company, Rolls-Royce, would be the one to go. But by 2000 Rolls-Royce had a larger share of new orders than Pratt and Whitney, even though both companies trailed far behind General Electric, which, through CFM, its joint-venture with the state-owned French company, SNECMA, also dominates the single aisle and regional jet markets. Rolls-Royce's position in the industry is based on its superior technological capabilities, embodied in the three-shaft architecture of its turbofan engines. The purpose of this study of Rolls-Royce is to document how the company has remained a power in the turbofan engine industry, notwithstanding its own troubled history and the relative lack of international success, more generally, of British companies in high-technology manufacturing industries over the past half century or so. Rolls-Royce made its initial investments in the three-shaft architecture in the 1960s (starting as early as 1963), when the eventual superiority of the technology was not at all assured. Since that time, Rolls-Royce has sustained its investments in these technological capabilities, despite dramatic changes in the company's ownership. Founded in 1906 (with origins dating back to the 1890s), Rolls-Royce was, until 1971, a publicly traded limited liability corporation that included both the original automobile division and the aircraft engine division. In 1971 the company went bankrupt because of its attempt to develop the RB211 for the Lockheed L1011 Tristar. When Rolls-Royce emerged from bankruptcy in 1973, it was as a nationalised company that had spun off its automobile business. Even as a nationalised company Rolls-Royce had to cope with the dramatic shift in the identity of its owner from the Labour governments of Wilson and Callaghan from 1974 to 1979 to the Conservative government of Thatcher from 1979 to 1987, when Rolls-Royce was privatised. Since 1987 Rolls-Royce has remained a publicly traded corporation, although one in which the British government has maintained a "golden share" that prevents a takeover of the company. One might expect that such major changes in modes of ownership as well as the company's relations with particular types of owners would have resulted in significant changes in corporate governance, including the ways in which the company allocated resources to the development of technology. The question that this study poses is how the technological development of the three-shaft engine was sustained from the late 1960s through the 1990s despite these dramatic changes in modes of ownership and changing pressures on the relations between managers and owners. The study shows how under very different governance and economic conditions, Rolls-Royce's management, dominated by career engineers, were able to sustain a development strategy that faced, and overcame, fundamental technological, market, and competitive uncertainties.

Resource author

Resource publisher

Resource publish date

Resource language


Resource content type


Resource resource URL

Resource license

Copyright INSEAD. All rights reserved