Publication

This paper presents an agent-based simulation model of the defense industry. The model resembles some of the key characteristics of the European defense sector, and studies how firms in this market will respond to the challenges and opportunities provided by a higher degree of openness and liberalization in the future. The simulation analysis points out that European defense firms will progressively become more efficient, less dependent on public procurement and innovation policy support, and more prone to knowledge sharing and inter-firm collaborations. These firm-level dynamics will, in the long-run, lead to an increase in the industry’s export propensity and a less concentrated market.