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The trade-off between innovation and defense industrial policy: A simulation model analysis of the Norwegian defense industry

Author

Listed:
  • Blom, Martin
  • Castellacci, Fulvio
  • Fevolden, Arne Martin

Abstract

The paper investigates the trade-off between innovation and defense industrial policy. It presents an agent-based simulation model calibrated for the Norwegian defense 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 defense and security objectives, is more Pareto efficient than a corresponding mixed strategy where policy makers simultaneously pursue both international competitiveness and defense and security objectives. (2) Under the conditions of the new EU liberalization regime, it finds that a stronger and more visible trade-off will emerge between international competitiveness and national defense and security objectives. Policy makers will have to choose which to prioritize, and set a clear agenda focusing on one of the two objectives.

Suggested Citation

  • Blom, Martin & Castellacci, Fulvio & Fevolden, Arne Martin, 2013. "The trade-off between innovation and defense industrial policy: A simulation model analysis of the Norwegian defense industry," Technological Forecasting and Social Change, Elsevier, vol. 80(8), pages 1579-1592.
    • Handle: RePEc:eee:tefoso:v:80:y:2013:i:8:p:1579-1592
    DOI: 10.1016/j.techfore.2013.01.005
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    Cited by:

    1. Day-Yang Liu & Chia-Kan Wang & Chung-Yi Fang & Pei-Leen Liu, 2021. "A Study of Project Financing on the Defense Industry in Systems Thinking Perspective," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 11(2), pages 1-6.
    2. Zhu, Huaijia & Chang, Shiwei & Chen, Bo & Zhu, Huaiqi, 2024. "How does military-civilian integration development influence corporate financial constraints in China? Evidence based on quasi-natural experiments," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1273-1289.
    3. Njamen Kengdo, Arsène Aurelien & Kitio, Victor, 2025. "The defence sector faces the resource curse: Effect of natural resource rents on defence spending in Sub-Saharan Africa," Resources Policy, Elsevier, vol. 105(C).
    4. Bojnec, Štefan, 2016. "Dual-use products export multipliers with the indirect effects," Technological Forecasting and Social Change, Elsevier, vol. 102(C), pages 287-296.
    5. Michail Ploumis, 2017. "Hellenic Defence Industrial Base in the Era of Economic Crisis," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 15(2), pages 103-125.

    More about this item

    Keywords

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    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • F1 - International Economics - - Trade
    • F5 - International Economics - - International Relations, National Security, and International Political Economy
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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