Promoting While Protecting Dual-Use Innovation in Emerging Technologies: Embedding National Security Regulation Into Innovation Policy

Western governments have increasingly adopted a “dual-use” approach to innovation policy in order to ease entry into their defense markets and to integrate largely civilian-driven research and development (R&D) in emerging technologies into military technology. Yet these governments also fear their adversaries can exploit their institutional openness and appropriate or compromise state support for innovation. Motivated by this dilemma, my dissertation asks whether innovation policy can both protect and promote dual-use innovation in emerging technologies.

I build a framework in my dissertation to conceptualize how governments can use innovation policy to create an incentive for firms to self-enforce their national security preferences when conducting R&D. I argue that governments shift part of the administrative and enforcement costs of national security policy onto the firms conducting the R&D by linking their support for R&D in emerging technologies to their national security preferences. However, I theorize that this policy imperative may conflict with another central objective of dual-use innovation policy: encouraging early-stage firms to enter defense markets.

A significant share of R&D in emerging technologies is conducted by early-stage firms. I develop a framework that theorizes that early-stage firms have limited resources and may rely on broad heuristics, such as investor or supplier reputation, to self-enforce national security regulation. I hypothesize that this mechanism may increase market concentration among the investors in, and the suppliers to, early-stage firms. I empirically test this prediction through a novel research design that leverages recent changes to American innovation policy and industrial security policy.

The results of this dissertation are of high relevance given the emerging global security environment. Many Western governments have sought to ease entry into their defense market in order to reverse the consolidation of their military-industrial base. However, they have also increasingly conditioned their support for innovation in emerging technologies on their national security preferences. By studying the interaction between these competing policy imperatives, my dissertation highlights the trade-offs inherent in using innovation policy as an instrument of national security regulation.