THE IMPACT OF DEFENCE INTEGRATORS AND STANDARDS ON VERTICAL AND HORIZONTAL INNOVATION IN THE DEFENCE INDUSTRY

This paper analyses the extent and character of product innovation in defence technologies where there are strong network effects, but where there is not a generally accepted system of open standards. Specifically, we examine the implications for innovation from the development of network-centric defence agencies accompanied by the creation of system integrators in the defence industry. The results show that although these developments are expected to have a number of positive impacts, such as enhanced security and gate-keeping of the relevant technologies, they are also likely to have an adverse effect on the available variety of new defence products.Defence industry, Innovation, Integrators, Network, Standards,

IS THE DEFENCE MARKET CONTESTABLE? THE CASE OF MILITARY AEROSPACE

I demonstrate the existence of two sources of contestability in the military aerospace market, within producing and export countries, through the State's triple role as unique buyer, regulator and seller. For the producing countries, I introduce the new concept, 'sovereignty price'; that is, the profit a State agrees to grant to its defence firms to perpetuate their domestic activities. This subjective, evolutionary concept provides a dynamic character to the theory of contestable markets. Moreover, I show that contestability is more effective than antitrust policies and a solution of the cost disease. Empirical cases are shown to confirm the theoretical analysis.Common Operating System, Contestable markets, Cost disease, Aerospace, Regulation, Sovereignty price,