Defense R&D and national R&D systems: A European outlook

Abstract

Defense R&D addresses a highly specific purpose: equipping the armed forces with up-to-date technologies. This R&D responds to the requirements of a monopsony, the government, which acts as the market maker for these products by direct procurement and export authorizations. But defense R&D is also embedded in national R&D systems. The question of the place and role of the defense R&D effort within a national R&D system is of particularly high interest if we take into consideration the possible links and externalities between civil and defense R&D.A 1998 study of the U.S. national innovation system arrived at two stylized facts on the evolution of R&D efforts there during the 1990s. First, the share of federal funding in R&D was decreasing due to the reduction of defense-related R&D. Second, industry funded a growing part of the R&D effort, thus inducing a high priority given to development rather than basic research.1 But instead of considering national systems of innovation (NSI) in general, in this article we concentrate our attention on a more specific item and, to some extent, on the core of NSI and technological innovation, namely, the organization of research and development. In particular, we consider "a set of institutions that (jointly and individually) contribute to the development and diffusion of new technologies. These institutions provide the framework within which governments form and implement policies to influence the innovation process." 2 This definition applies both to innovation in general and to R&D in particular.This article reviews differences in European national R&D systems especially in terms of the place of defense R&D. It is based on annually collected data by the OECD, consistent with the conventions of the so-called Frascati manual. 3 The data contain information on who finances and who performs R&D. Elements of defense R&D are included, and this allows us to illustrate the place of defense R&D in national R&D systems.The next section discusses the data, and previous work based on it, and focuses on the evolution of defense R&D in the six European countries who signed the socalled Letter of Intent (or LOI) and who together account for more than 90 percent of defense R&D in the EU. 4 The section thereafter details the role of defense R&D in the French national system of innovation in particular. European comparisonsWe first discuss the role of government in the respective national R&D efforts, then we detail the split of public funding into civil and defense objectives. All monetary amounts are expressed in US$ purchasing power parities (exchange rates are defined by reference to a representative basket of goods and services). But methodological constraints on data gathering are examined first to highlight that and why one cannot directly compare defense R&D across different funding sources for gross domestic expenditure on research and development (GERD). 5 MethodologyThe OECD collects annual data on R&D from its member states. To be comparable these data must be built on the same ...