A BRAVE LEAP OR A GRADUAL CLIMB? THE DYNAMICS OF INVESTMENT IN R&D OF INTEGRATIVE TECHNOLOGIES

Our paper explores the optimal investment in integrative technologies (such as command and control systems), which are a major part of defense R&D at the beginning of the 21st century. Employing a dynamic optimization framework, we find that under linear development costs, it may be optimal or nearly optimal to build military forces using a myopic, short-termed, approach. In such cases, it would be optimal to transform an armed force into a network-centric environment within just a few years. When development costs are convex however, early investment in technological infrastructure is required, extending the transformation period over more than a decade.Technology, Defense R&D, Dynamic optimization,

THEORY AND APPLICATION TO THE US MILITARY

An ever-growing share of defence R&D expenditures is being dedicated to the development and fielding of integrative technologies that enable separate individual systems to work in a coordinated and synergistic fashion as a single system. This study explores the optimal defence budget allocation to the development and acquisition of weapon systems and to the development of integrative technologies. We develop a suitable optimization framework, and then use it to derive the optimal budget allocation and analyse its properties. Finally, we use US defence budget data to calibrate the parameters of the model and provide a quantitative measure for the apparent US military supremacy.Research and Development, Integrative technologies, Budget allocation,