Innovation!

In this week’s Diplomat column, I touch on some of the questions associated with my latest academic project:

But whether, with respect to the defense industry, small firms play a large role, a small role, or a significant role in alliance with large firms, their presence in the broader civilian economy produces different expectations for differently structured defense-industrial bases. The Soviet defense-industrial base never took advantage of small firms, which did not exist in context of Soviet defense procurement. This hardly meant that Soviet industry couldn’t innovate, or that it couldn’t effectively serve its military customers. It does, however, suggest that innovation will take more incremental, capital-intensive forms than in systems (relatively) more friendly to small-firm input.

The Chinese system has developed in a much different manner than the Soviet one, at least since the 1980s. There are plenty of small, innovative Chinese technology firms. However, granting the opacity of the Chinese defense industrial system, there is little to suggest that the PLA relies on small firms for innovation. Rather, the PLA seems to utilize a combination of time worn and novel forms of espionage to remain abreast of the latest military innovations in the United States and elsewhere.