Defense Goods and Innovation: Public Economics, Industrial Organization, Dual-Use Industries, and Innovation Policy Evaluation

Innovation et biens de défense: économie publique, économie industrielle, industries duales et évaluation des politiques d'innovation

Richard Le Goff ()
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Richard Le Goff: UEA - Unité d'Économie Appliquée - ENSTA Paris - École Nationale Supérieure de Techniques Avancées - IP Paris - Institut Polytechnique de Paris, CRG I3 - Centre de Recherche en Gestion I3 - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - Université Paris-Saclay - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique, I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique

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Abstract: Innovation in defense is driven by ambitious public policies and high levels of funding, as evidenced, for example, in France by the 2019-2025 and 2024-2030 Military Programming Laws and the creation of a Defense Innovation Agency in 2018. This article explores the relevance of economic concepts and tools for guiding decisions on products (goods or services) and innovations in the defense sector. The first part highlights the usefulness of the concept of "market failures" in analyzing the role of the state in this area. The second part examines "dual" and "defense" innovations from an industrial economics perspective, presenting the main findings. Thus, manufacturers of defense products (goods or services), such as missiles or components used in the production of military equipment from the aerospace or naval industries, benefit from scientific and technological knowledge produced either directly by themselves, by other companies, or by the innovation and R&D ecosystem surrounding them. These manufacturers are in fact participating in the systemic changes characterizing global innovation dynamics, as analyzed, for example, in the work of Hobday, M., Rush, H., Tidd, J. (2000) characterizing "Complex Products and Systems" (CoPS), which partly apply to defense manufacturers, but also by the contributions of Chesbrough H., (2003), presenting "Open Innovation" as opposed to the "closed" innovation model, or those of Leydesdorff, L., Etzkowitz, H., (1998), proposing the "Triple Helix" model to understand the transformations in innovation processes. Finally, the third part proposes the application of economic evaluation methods for public policies to defense products and innovations, using the concept of "co-benefits" with the aim of considering all intended and unintended, direct, indirect, and induced effects and monetizing them. In conclusion, the article highlights the importance of making extensive use of theoretical frameworks for economic analysis to better understand and encourage production and innovation in the defense sector.

Keywords: Technological Change; innovation systems -Government Policy; technological sovereignty; public investment; co-benefits; economic evaluation; market failures; dual-use industries; innovation policy; industrial organization; public economics; public goods and defense goods; systèmes d'innovation defense innovation; souveraineté technologique; investissement public; cobénéfices; évaluation économique; défaillances de marché; industries duales; politiques d'innovation; économie industrielle; économie publique; biens publics et biens de défense; innovation de défense (search for similar items in EconPapers)
Date: 2025
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