Innovation and Threats

ABSTRACT

All major research programs that study technological change find common ground in emphasizing the explanatory significance of domestic institutions in determining national innovation rates. And yet, after decades of research, this domestic-centered approach has yet to identify any particular set of institutions or policies that explain variation in innovative performance over time and across cases. Recently, a new research program has emerged which argues that this bottleneck to theory development is due to a critical omitted variable bias: international security. This article probes one facet of this argument by examining the relationship between international threat environments and national innovation rates. The regression results show a positive effect of threats on national innovation, a finding that is robust across different specifications and periods of analysis. Additionally, unlike previous studies that find no significant relationship between security alliances and military innovation, the opposite is true of threat: states faced with high external threat environments tend to innovate at the defense technology frontier.

KEYWORDS:

• Innovation
• technology
• threat
• security

Acknowledgments

I would like to thank Akihiko Tanaka; Yasuhiro Matsuda, Mark Taylor, Kadir Nagac, and Petter Lindgren for prior comments on this paper, as well as the editors and anonymous reviewers at Defence and Peace Economics.

Disclosure Statement

No potential conflict of interest was reported by the authors.

Notes

1. This paper follows an established research design on this topic. For examples, see: Taylor (2009) and Schmid, Brummer, and Taylor (2017).

2. For a concise review of the emergence of these research streams, see Breznitz (2009). For a longer discussion on this topic, see: Taylor (2016).

3. For a long-form version of this literature review, see: Grieco, Cheng, and Guzman (2014).

4. For an extensive review, see: Taylor (2016).

5. Conversely, distributional politics will reign supreme when internal tensions overshadow international ones, as domestic infighting swells to the detriment of innovation. According to Taylor (2016), it is the relative balance of these two contending dynamisms that over time determines which states are able to transcend forces of innovation inertia and which fall prey to them.

6. In a specific case study, Solingen (2007) argues for why some states pursue nuclear weapons technology while others renounce them, placing the international security environment as a hinge upon which incentive structures for elites are grounded. In a comparative study, Schmid and Huang (2017) argue that Japan innovated and adopted in rail technology while China did not due to differing perceptions of the relationship between railroads and the international security environment. For a review, see: Brummer (2017), and for studies that point to how external threat environments can animate policy innovation, see: Brummer (2007, 2016) and Hanson and Lindgren (2020).

7. For a more extended review of this literature on alliances and innovation, see: Schmid, Brummer, and Taylor (2017).

8. This is in keeping with IR’s finding that threat, both perceived and operationalized, leads states to increase their fiscal-administrative capacity in order to compete with rivals. Poggi (1990), for example, has argued that states that have adapted better to their threat environments have survived and flourished, while those that have not have fallen from grace or disappeared from the world system all together. It is important to note that this adaptation is not necessarily by rational design, or even to a specific technological end, and is reminiscent of ‘a state of nature’ conceptualization of the international system. This leads to the hypothesis that a state’s innovation rate should reflect in some identifiable ways with its external threat environment, and that the higher the threat the more readily a state will innovate as a ‘natural’ means for survival.

9. This is in keeping with IR’s finding that higher international threat environments cause increased security production. For example, Khan et al (2020) find that increased geopolitical risk, such as border disputes, wars, and terrorism, leads countries to increase their defence expenditures.

10. Innovation in cultural or culinary products also fall outside the scope of this study. Rather, focus is given to technological innovation because it brings with it the ‘increasing returns upon which endogenous growth, military and industrial competitiveness, and considerable national wealth are based’ (Taylor 2012, 119). It is also important to emphasize that the dependent variable considered in this article is innovation, not diffusion, which is a similar but separate phenomenon (Schmid 2017, 2018a, 2018b).

11. For a discussion on the importance of geography, see Webb (2007).

12. Leeds provides an abbreviated description of this approach to measuring threat on her website: www.ruf.rice.edu/~leeds/research.html.

13. The global unweighted S score obtained from the EUGene computer program is used (Bennett and Stam 2000). To identify the threshold for friendly versus unfriendly states, the median S score for all politically relevant dyads from 1974 to 2000 is calculated (which is.775). States that share an S score with the member state below.775 in the given year are included in the threat environment. Composite Index of National Capability (CINC) is a statistical measure of national power in the Correlates of War dataset. It is comprised of an average of percentages of world totals in six different components representing demographic, economic, and military strength.

14. For example, interservice competition (Cote 1996); defense sector culture (Kier 1997); structure of institutions (Avant 1993); and bureaucratic politics (Kaufman 1994). For reviews, see: Schmid (2017, 2018a); Schmid, Brummer, and Taylor (2017).

15. A finding that tracks with Sapolsky and Gholz’s argument that threat level can increase investment in the defense industries. See Gholz (2000) and Gholz and Sapolsky (1999). Importantly, this argument is one of threat perception, and not simply objective measures of threat. It is therefore important assess perception of threat as it relates to national innovation, and undertaking that future scholarship should address. For a research program that examines a specific case (Japan) of external threat perception in this regard, see Oren and Brummer (2020a, 2020b); Brummer and Oren (2017); and Oren (2019).

16. For a far more lengthy treatment, see: Schmid (2018a).

17. In this regard, scholars would do well to consider past findings on how the relationship between war, economic and political development constitute just such an endogenous system (Thies and Sobek 2010).