Many countries want to expand their local economy through local production, which provides an incentive to US government contractors and defense companies to expand their footprints. These governments may not have the purchasing power of a large country like the US, but they present more than just a selling opportunity.
For instance, international markets can be great sources of talent — in management, R&D, operational excellence and other areas. This is crucial for an industry that has been facing an aging workforce for many years and can benefit greatly from the different skills and perspectives of a diverse workforce. Research shows that teams that rated highly for diversity and inclusion were 45% more likely to improve market share and were 70% more likely to find success in new markets.
Also, expanding R&D functions internationally may foster developments, at a cheaper price point, that can be harnessed and brought back to be further refined and developed for US customers. Using corporate venture capital to drive innovation and incubate new technology, solutions and products could even provide an avenue to the commercial marketplace, and that may prove to be a better use of capital than share buybacks.