Innovation and Liberalization in the European Defence Sector
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Innovation and Liberalization in the European Defence Sector

A Small Country Perspective

Fulvio Castellacci and Arne Fevolden

This book investigates the ongoing liberalization of the European defence market and explores how companies can respond to these changes by adjusting their innovation and internationalization strategies. Traditionally, the EU defence sector has been fragmented into several weakly integrated and highly protected domestic markets which often leads to the duplication of innovative efforts, rising production costs and an overall lack of competitiveness. Using a variety of methods including case studies, econometric analyses and agent-based modelling, the authors reveal that liberalization will provide new and relevant opportunities for European defence companies. However, any potential benefits will only be realized if private firms perceive that a full and well-coordinated implementation process is in place.
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Chapter 7: Conclusions and policy implications

Fulvio Castellacci and Arne Fevolden


The European defence industries are currently undergoing a transformation. The old ‘national defence industries’ that could rely on protection and regular orders from their national governments are being replaced by an integrated, global defence industry that both produces and sells defence equipment internationally. Although national governments still play a role in defining the framework conditions for their domestic industries, the policy instruments that they can apply are increasingly being limited by supranational regulations, and the business opportunities of their defence industries are increasingly being shaped by factors outside their own borders. In this book, we have attempted to understand how processes of defence market liberalization affect the European defence industries. The book has investigated this issue from the perspective of companies, national defence authorities and the EU, and has looked at the implications of liberalization processes for innovation, international competitiveness and national security. Through the use of diverse methods such as econometrics, interviews, case studies and agent-based modelling, this book has sought to show that both firm-level dynamics and country-level characteristics affect the outcome of the liberalization process. And through the application of a diverse set of theoretical approaches, mostly rooted within the fields of economics, business studies and political sciences, it has sought to show that issues of security, innovation and international competitiveness are deeply intertwined.

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