New Interactions between Military and Civilian R&D: Propositions for a Swiss National Technology Strategy

30. April 2025
von Dominique Foray (SSC/EPFL)
#Wissenschaftspolitik #Forschungspolitik #Innovationspolitik #Policy Advice #englisch

In a time of growing geopolitical tensions and increasing budget constraints, Switzerland is facing a technological turning point. The simultaneous rise in defence spending and the looming cuts to education and research funding call for a new national strategy. Historical experience – particularly the postwar U.S. model – shows that targeted investments in military R&D can also benefit civilian innovation. A Swiss technology strategy must therefore deliberately foster and institutionalize synergies between the civilian and military sectors.

In the current economic and geo-political context, one can observe in Switzerland (as well as in the EU area) two significant national policy trends involving long-lasting effects on scientific and research systems :

  • A prospect for a massive increase of military and defence expenditures – including investments in defence-related R&D – as a direct consequence of the Ukraine war and the evolving political landscape in the United States;

  • The perspective of a significant decrease in public funding for higher education and research institutions, due to public budget austerity.

The coincidence of these two trends is a call to address the issue of their congruence , i.e., to what extent the first trend can be viewed as an opportunity to invest in the higher education and research system – and, in doing so, help mitigate some of the detrimental effects of the second trend ? This issue underscores the need to revisit the relationship between civilian and military R&D. ‘’Revisiting’’ refers to the fact that an abundant literature was produced on this topic, which analysed the dynamics of civilian and military R&D during the Cold War in the US as well as in France and the UK. The topic was losing traction, though, after the collapse of the Soviet system.

It is therefore necessary to : i) re-examine the postwar model of relationships between military and civilian R&D, which was particularly fruitful in the US ; ii) assess what rationales and mechanisms are still valid and what others will not work anymore and finally ; iii) discuss the foundations of a national technology strategy for Switzerland aiming at the promotion of both military and civilian research and technology and at the design of new mechanisms/institutions to catalyse coordination and synergies between multiple entities and invest in crossover capabilities.

 

1 How does defence-related R&D influence innovation in civilian technologies ? Rough lessons from the US postwar experience

Postwar period : the great attention of policies and institutions on the interactions between defence-related R&D investments and civilian innovations

The time from the end of World War II until the collapse of the Soviet empire (postwar period) was characterized by high levels of public investments in military R&D, and consequently a strong attention of policy makers on how such huge investments in defence related R&D were able to positively influence innovation in civilian technologies. Three important channels through which government funding of defence-related R&D may affect civilian innovation, were promoted and supported by national policies, in particular in the US, England and France:

  • Support through defence programs for fundamental research that contributes general knowledge and may benefit elements of a nation’s R&D infrastructure ;

  • The development within defence programs of applied research that yield important civilian applications – the so-called commercial spinoffs from defence research ;

  • Public procurement of civilian technologies for military purposes.

The Department of Defence (DoD) of the United States played a pivotal role in the whole R&I ecosystem through an intensive use of the three channels (Mowery, 2012a) :

As for the first channel, the scope for the ‘’pure’’ knowledge- based benefits from defence R&D (channel 1) was limited because most national defence-related R&D programs focused on ‘’development’’ spending. But in the US, defence-related investments in basic and applied research have accounted for a significant share of federally funded R&D in such fields as computer science or engineering. Therefore, postwar DoD funding of academic R&D contributed to the creation of the nation’s R&D infrastructure that has been an important source of civilian innovations, new firms and trained scientists and engineers in critical areas (Mowery and Simcoe, 2002 ; National Research Council, 1999, Blumenthal, 1998).

Regarding the second channel, DoD funded massively research and innovation projects in small companies that generated both defence and civilian applications. For example, it has funded biotech R&D in a variety of applications that appear to have dual-uses in the civilian sector. The mechanism involved the funding of projects in small firms through the SBIR (Small Business Innovation & Research) program (Feldman, 1999).

Regarding the third channel, DoD operated large scale procurement of new technologies and components. Defence procurement can affect the development of civilian applications. For example, the US military purchasers – whose requirements typically emphasized performance above all characteristics (including costs), played an important role as a lead purchaser, placing large orders for early versions of new technologies. These procurement orders enabled suppliers of products such as transistors or integrated circuits to reduce costs and improve quality, reliability and functionality. Such production-related learning and cost reductions, generated by military procurement, led to lower prices, opening civilian markets, which typically are more price sensitive. Contracts were often awarded to small firms.

Within the whole DoD institution, DARPA played a crucial role as a specific defence R&D agency (e.g., did not engage in large scale procurement) – oriented towards the support of radical technological change, which requires the funding of large, group-oriented projects and institutions rather than individuals and thus implies strong and efficient internal process for selection, coordination and monitoring and the discretion of high level program managers (Azoulay et al., 2018).

 

From the 90s to Ukraine war – a marked inattention to the problems of interactions between defence and civilian R&D

The famous ‘’peace dividends’’ translated into a significant decrease in military expenditures, including the area of defence related R&D investments. Consequently, the concern of making the best use of defence related R&D investments not only for national security, but also for civilian innovations declined significantly. Two other features made these topics and issues less visible and less central.

A new emerging trend concerned the declining influence of defence-related markets on the overall evolution of technologies in ICTs and electronics. The relationships between military and civilian sectors changed with civilian inventions and technologies leading the race. The point was then more about facilitating the use of civilian off-the-shelf (COTS) components in weapon systems. Rather than subsidizing the development of highly specialized military versions of technologies, these COTS programs were intended to support the rapid insertion of equally advanced civilian versions of technological components in weapons development programs on an accelerated basis.

Secondly, the terrorist attack on 11 September 2001 showed the limits of conventional defence R&D – to be replaced by new security objectives and domains of relevance. Subsequent innovations in the defence and security sector clearly changed direction. They concerned mainly the field of intelligence rather than the traditional areas of defence R&D: national security intelligence in the antiterrorist era involves the gathering of information on terrorists (masterminds, operatives, and supporters), their modes of operation and sources and channels of finance. Intelligence broadly means the reduction of uncertainty. R&D aimed at providing better intelligence capabilities is therefore very different from the traditional defence R&D domains (dealing with the costly development of big weapon systems such as new jet fighters, nuclear subs, long-range missiles, etc.). This contributed to undermine the rationale for military-civilian technologies interactions (Trajtenberg, 2004).

All these factors and events contributed to a form of sleepiness of the institutions, norms and processes, which during the postwar period had proved to be very effective to maximize the relationships between defence and civilian R&D.

 

A new era both in geopolitics and military innovations

We are now entering a new era. The coincidence between a significant increase of public effort on defence and security on the one side, and a state of austerity, which is affecting all other domains – including higher education, research and innovation – on the other side, generates new constraints and opportunities. The opportunities are related to the generation of new mechanisms, institutions and models to maximise the interactions between military and civilian R&D.

The new era is also marked by the emergence of novel models of military innovation. Mastering these new models requires the adoption of innovative approaches in the area of R&D. As demonstrated in Ukraine, national armies need to cultivate and support agile R&D units in order to develop and operate the military infrastructure at the same time. The case of drones highlights, how operation and development are intimately related through massive learning by doing opportunities resulting from multiple trials, rapid feedback and a large number of quasi-identical experiences on operation areas. Escalating the learning curve requires therefore high-level military R&D capabilities, which can be deployed directly on operation areas. This intimate connection between development and operation makes also long-lasting procurement contracts questionable at least for some technological domains.

 

2 Military R&D and innovation in Switzerland

Before identifying a couple of guiding principles for a national technology strategy, it is useful to have a look at the military R&D and innovation system in Switzerland.

One can make four observations:

A)   As a small and neutral country which is not part of the EU and the NATO, Switzerland has fewer opportunities for international military research and technology collaboration than other countries. This lack of opportunities represents an incentive to search for the highest degree of synergies and spillovers within the country – e.g. between the military and civilian domains in Switzerland.

B)   The public funding of military R&D is limited to financial contributions by the Federal Department of Defence, Civil Protection and Sport. Essential research and innovation policy agencies, such as the SNSF and Innosuisse, are not involved in military R&D.

Based on the data from armasuisse (2024), departmental R&D expenditures amount for 9.1 Mio CHF in 2024 and R&D contracts to other institutions (Universities, ETH domain, industries) amount for 16.5 Mio CHF.

Armasuisse research expenditure for the period 2019–2023. (Source: armasuisse)

While we can expect a significant increase in the general defence budget, it is not clear what fraction of such increase will be allocated to R&D within the next decade.

C) The Swiss defence industry includes a significant number of companies . The list of companies which need special permits for exportation includes around 80 entities – a significant fraction of this population being active in the defence sector (WOZ, 2024). While not all these companies have in-house R&D capacities, the vast majority is engaged in product and process innovations. Based on the data of the Federal Statistical Office (2023), the amount of defense-related intramuros R&D expenditures of private firms is negligible: 89 million CHF; as compared for example to the domain of production technologies (intramuros R&D expenditures of private firms), which is about 6 billion CHF.[1]

D) The research agenda of the defence sector is rich, broad and has significant overlaps with the current strategic areas and challenges of civilian R&D and technological innovations. Many scientific and technological challenges are thus relevant for both domains, which generates important opportunities for synergies and spillovers.

There are many ‘’modes of interactions’’ between the military R&D public sector, the defence industry and the ERI system, which need careful considerations. These modes are very close to the three channels of the postwar model: military procurement, national R&D infrastructure and commercial spinoffs. The Knowledge and Technology Transfer (KTT) activity from the ERI system to the defence industry is another channel which might play a significant role in the future as well as the support of entrepreneurship in dual-use technologies.

 

3 Towards a national technology strategy (NTS) – some guidance

What lessons can be drawn from these experiences? In other words, what should be the foundations of a Swiss national technology strategy (NTS), aiming at the promotion of both military and civilian research and technology and at the design of new mechanisms/institutions to catalize bottom-up coordination and invest in crossover capabilities ? The lessons from the post war period are straightforward but not all are still valid today.

DoD policy capabilities

The US DoD had multiple roles and high-level capabilities to support the whole research and innovation ecosystem through the three channels mentioned above and the support of specific technological breakthrough thanks to DARPA. Obviously, the military sector in Switzerland does not reach such high capabilities level. However, a minimum is required and needs to be built rapidly as an essential condition for the development of an integral (military and civilian) technology strategy. For example, designing Public Procurement for Innovation (PPI) requires complex competences which need to be developed (Mowery, 2012b). The same is true for designing and implementing Public Private Partnerships (PPP) involving R&D and innovation activities. There are many design issues to make a PPP truly innovative (Stiglitz and Wallsten, 1999).

A first condition for the future NTS involves a sufficient level of capabilities of armasuisse to operate efficiently as an R&D and procurement agency

Open institutions

The productive role of the military and defence institutions as a key actor in the whole US eco-system was far less significant in other countries, where defence R&D related investments were also massive. In France, for example, the ‘’bunkerization’’ of the military ecosystem generated a suboptimal situation characterized by very little spillovers and other effects on academic research, national research infrastructure as well as on the civilian industries. In the US, classified R&D was indeed important, but a great deal of defence related R&D consisted of long-term research that was conducted in universities, which by their nature are relatively open institutions, and of research and innovation projects conducted in small companies of the commercial sector. In contrast, a lack of interchange between military and civilian researchers and engineers weakened the postwar British or French innovation systems (particularly in computer science and innovation).

A second condition for the future NTS involves the open nature of the concerned institutions and high degrees of permeability between military institutions and the civilian research and higher education system.

Policy instruments and programs

A few policy instruments are needed to channel efficiently the defence funding towards the whole innovation ecosystem. In the US, SBIR and DARPA played this role : the SBIR program on the civilian side supported the engineering of project funding, which related the defence sector to civilian small companies. DARPA on the defence side proposed a new model of research coordination and management towards radical innovations. Recently, the Swiss Science Council SSC recommended that the (D)ARPA-approach should also be implemented in Switzerland (SSC 2023). We might also think of a specific program supported by funding agencies oriented towards the development of dual-use technologies and the support of start-ups in this area.

A third condition for the future NTS involves the existence and efficient operation of policy instruments (R&D and innovation programs such as SBIR and DARPA in the US).

This condition involves some ERI system adaptation and adjustment (similar of what is today decided in EU concerning the European Innovation Council EIC, which is now allowed to fund startups in the area of dual-use technologies). The SNSF and Innosuisse should be incentivized to revisit their rules and the corresponding legal basis.

ERI system’s engagement

The institutional variety and governance quality of the Swiss R&I system is a strength to realize the numerous opportunities for collective actions between the military and civilian sectors: ETH domain (Schools and Institutes), cantonal universities and Universities of Applied Sciences, SNSF and Innosuisse, Article 15 RIPA competence centers (Inspire, CSEM, AM-TTC) as well as research infrastructures – all these organizations have the potential to provide a range of ‘’services’’ to support collaborative research and partnerships, to create new policy instruments or programs, for example in the area of dual-use technologies, and to accelerate knowledge transfers between the civilian and military institutions (see for example the SNSF position paper (2024), in response to the European Commission White Paper (2024) on dual-use technologies).

A fourth condition involves a high-level mobilization of all ERI actors (which might imply the adoption of reforms and new governance rules) to ensure a strong engagement of the whole ERI system into the NTS.

An orchestrator to incentivize technological win-wins across multiple objectives

Given the extraordinary circumstances of our present time – characterized by multiple crisis of very different nature – wars, climate change and sustainability, global health, AI, to mention a few – there is certainly a potential danger of optimizing for only one single objective, rather than incentivizing technological win-wins across multiple objectives. For example, if a national strategy were about a single mission such as security, key win-win opportunities may be lost. There is therefore a high risk of lost opportunities when policymakers focus solely on one objective (Fuchs, 2022).

This last condition is about mitigating the potential danger of optimizing for only one single objective : in parallel to mission-oriented efforts and to the institutional pillars of the ERI system (ETH, Universities, UAS, SNSF, Innosuisse, etc.), Switzerland requires a nimble institution that can work within the system and identify and act upon the opportunities afforded by win-win investments.

Such agency or committee will be provided with the data and analytic capabilities to quantify and make transparent the implications of any particular research and technology solution for each national objective (e.g., security, sustainability, health, etc.), the trade-offs different technology solutions present across multiple national objectives, and the potential self-reinforcing benefits of certain choices for subsequent decisions.

 

On this blog, members of the Swiss Science Council SSC express their personal opinion. This does not necessarily correspond with the analysis or position of the SSC.

 

References

Armasuisse, Plan de recherche à long terme, 2025–2028

Azoulay P. et al., Funding Breakthrough Research : Promises and Challenges of the ‘ARPA Model’, NBER, Working Paper Series 24674, 2018

Blumenthal, M., Federal Government Initiatives and the Foundations of the Information Technology Revolution : Lessons from History, AEA Papers and Proceedings, May 1998

European Commission, On Options for Enhancing Support for Research and Development Involving Technologies with Dual-use potential, White Paper, Brussels, 2024

Feldman, M., The Role of DOD in Building Biotech Expertise , Report to the National Academy of Sciences, 1999

Fuchs, E., What a National Technology Strategy Is and Why the US Needs One, Issues in Science and Technology, National Academies, 2022

Mowery, D.C., Defence-related R&D as a Model for ‘’Grand Challenges’’ Technology Policies, Research Policy, 41/10, 2012a

Mowery, D.C., US Government Procurement Policy and Technical Change : a Selective Survey, Haas School of Business, University of California, Berkeley, 2012b

Mowery, D.C. and Simcoe T., Is the Internet a US Invention ? An Economic and Technological History of Computer Networking, Research Policy, 31, 2002

National Research Council, Funding a Revolution, National Academies, 1999

Stiglitz, J. and Wallsten, Public-Private Technology Partnerships, American Behavioral Scientist, (43)1, 1999

Swiss National Science Foundation, Dual Use in the EU Framework Programme and the SNSF Perspective, Bern, 2024

Swiss Science Council SSC, Mission-oriented Research and Innovation in Switzerland, 2023

Trajtenberg M., Crafting Defence R&D Policy in the Anti-terrorist Era, Innovation Policy and the Economy, vol.4, 2004

WOZ, Der Rüstungsreport, Zürich, Die Wochenzeitung, 2024

 

[1] I wish to thank Pierre Sollberger (Swiss Federal Statistical Office SFO) for this information.

Dominique Foray
Dominique Foray is Full Professor at the EPF Lausanne, where he heads the Chair of Economics and Management of Innovation. His research focuses on the microeconomics of innovation, of knowledge and of related institutions.