Defense innovation at any (out of control) cost? The stalemate in today's R&D and an alternative model

Renaud Bellais


Technological superiority is a key element to achieve defense effectiveness, and R&D spending is crucial to access leading-edge technologies. Nevertheless, the current defense R&D model seems to reach its limits, leading to an out-of-control burden: In spite of spending almost USD70 billion yearly, defense R&D in NATO countries does not produce the expected results. This low effectiveness leads to criticism about today's model of defense R&D, especially the channeling of credits by large incumbents through the Lead System Integrator model. Spurring disruptive technologies and path-breaking innovation requires an alternative approach. It is then interesting to analyze the possible use of venture-capital mechanisms to complement the mainstream approach to defense R&D. Even though the article does not develop a full analysis of the relationship between defense R&D and the principles of venture capital, it identifies criteria for such an alternative approach.


Defense burden; defense technology; R&D; disruptive innovation; lead-system integrator; venture capital

Full Text:



Bellais, R. 1999. Production d'armes et puissance des nations. Paris: L'Harmattan.

Bellais, R., ed. 2004. Économie et Défense: Nouvelles frontières entre États et marchés. Paris: Éditions Descartes et Cie.

Bellais, R. and R. Guichard. 2006. “Defense innovation, technology transfers and public policy.” Defence and Peace Economics, Vol. 17, No. 3 (June), pp. 273-286.

Bellais, R. and G. Le Blanc. 2002. “How is Terrorism Disruptive for Conflict Analysis.” Sixth Annual Middlesex Conference on Economics and Security. London. June.

Carter, A. 2001. “Keeping the technological edge,” pp. 129-163 in A. Carter and J. White, eds. Keeping the Edge: Managing Defense for the Future. Cambridge, MA: The MIT Press.

Christensen, C. 1997. The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. Boston, MA: Harvard Business School Press.

Edwards, J. 2005. The Geeks of War: The Secretive Labs and Brilliant Minds Behind Tomorrow's Warfare Technologies. New York: Amacom Books.

Gansler, J. 1989. Affording Defense. Cambridge, MA: The MIT Press.

Gansler, J. 1998. “Defense Science and Technology: Looking to the Future.” DARPA 40th Anniversary Symposium. Arlington, 8 April.

Gompers, P. and J. Lerner. 2003. “Short-term America revisited? Boom and Bust in the Venture Capital Industry and the Impact on Innovation,” pp. 1-27 in A. Jaffe et al., eds. Innovation Policy and the Economy, Vol. 3. Cambridge, MA: The MIT Press.

Hartley, K., R. Bellais, and J.P. Hébert. Forthcoming. “The Evolution and Future of European Defense Firms” in M. Chatterji and J. Fontanel, eds. Economics of International Security. New York: North Holland/Elsevier.

Kurth, J. 1993. “The Follow-on Imperative in American Weapons Procurement, 1960-90,” pp. 304-321 in J. Brauer and M. Chatterji, eds. Economic Issues of Disarmament. London: McMillan.

Lichtenberg, F. 1995. “Economics of Defense R&D” in T. Sandler and K. Hartley, eds. Handbook of Defense Economics, Vol. 1. Amsterdam: Elsevier Science.

Matsuyama, K. 1999. “Growing through Cycles.” Econometrica, Vol. 67, No. 2, pp. 335-347.

McCullagh, D. 2000. “CIA Looks to Vnture Capital.” Wired. 19 October.

Middleton, A., S. Browns, K. Hartley, and J. Reid. 2006. “The Effect of Defence R&D on Military equipment Quality.” Defence and Peace Economics, Vol. 17, No. 3 (June), pp. 117-139.

[OUSDC] Office of the Under Secretary of Defense — Comptroller, 2008. National Defense Budget Estimates for FY2009. Washington, DC: U.S. Department of Defense, March.

Schinasi, K.V. 2008. “Better weapon program outcomes require discipline, accountability, and fundamental changes in the acquisition environment." Testimony before the Committee on Armed Services, U.S. Senate, Washington, DC: U.S. Government Accountability Office, 3 June.

Setter, O. and A. Tishler. 2006. “A Brave Leap or a Gradual Climb? The Dynamics of Investment in R&D of Integrative Technologies.” Defence and Peace Economics, Vol. 17, No. 3 (June), pp. 201-222.

Trajtenberg, M. 2006. “Defense R&D in the Anti-terrorist Era.” Defence and Peace Economics, Vol. 17, No. 3 (June), pp. 177-199.



  • There are currently no refbacks.

Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.