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The Trade-off between Innovation and Defence Industrial Policy: A Simulation Model Analysis of the Norwegian Defence Industry

Martin Blom, Fulvio Castellacci and Arne Fevolden

MPRA Paper from University Library of Munich, Germany

Abstract: The paper investigates the trade-off between innovation and defence industrial policy. It presents an agent-based simulation model calibrated for the Norwegian defence industry that compares different policy scenarios and examines the effects of a pending EU market liberalization process. The paper points to two main results. (1) It finds that a pure scenario where national authorities focus on, and provide support exclusively for, either a) international competitiveness or b) national defence and security objectives, is more Pareto efficient than a corresponding mixed strategy where policy makers simultaneously pursue both international competitiveness and defence and security objectives. (2) Under the conditions of the new EU liberalization regime, a stronger and more visible trade-off will emerge between international competitiveness and national defence and security objectives. Policy makers will have to choose which to prioritise, and set a clear agenda focusing on one of the two objectives.

Keywords: Innovation policy; industrial policy; defense industry; EU liberalization; agent-based simulation model (search for similar items in EconPapers)
JEL-codes: C6 H0 L1 O3 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cmp, nep-cse, nep-ino and nep-tid
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Journal Article: The trade-off between innovation and defense industrial policy: A simulation model analysis of the Norwegian defense industry (2013) Downloads
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