The domestic aerospace industry spans many sectors critical to America's technological prowess—from advanced jet fighters that provide unchallenged air superiority to passenger airliners, which are a big plus for the nation's foreign trade account.

But these sectors—and others—are beginning to feel the rise of global competition. China and India, for example, are increasingly busy launching satellites, and have grand ambitions for space travel. Europe's Airbus consortium presents a major challenge to Boeing's dominance especially given the government subsidies provided for research and development. At home, the aerospace industry is adjusting to the shifting priorities of its largest customer, the U.S. Defense Department, which is entirely re-evaluating which its fighting systems’ needs and even how to structure the acquisition process.

To understand how the industry is positioning itself to meet a host of challenges, Knowledge@Wharton spoke to Marion C. Blakey, president and CEO of the Arlington, VA-based Aerospace Industries Association (AIA). The association represents the nation's top manufacturers and suppliers of civil, military, and business aircraft, helicopters, unmanned aerial vehicles, space systems, missiles and aircraft engines. The AIA also represents members who build industry-specific materials and components, and that provide equipment services and information technology. An edited transcript follows: Knowledge@Wharton Podcast with Marion C. Blakey