Economic Impact Analysis of Defense Technology Transfer

Abstract

With the end of cold war, developed countries have institutionalized the defense technology transfer system to maximize the use of defense technology on civilian sectors, to attempt early-launching of defense projects by application of civilian technology, and to efficiently develop dual-use technology. This study has two objectives: (1) to estimate the extent of contribution of self-developed defense technology to the development of defense and civilian industries; (2) to propose policy implications for efficient use of defense technology. Among 1600 technologies developed by Agency for Defense Development (ADD) from 1980 to 2006, 243 technologies with traceable path of diffusion have been studied. Economic impact of technology diffusion has been studied in three aspects—its contribution to sales, profit, and value-add. The ratio of sales increase to R&D investment turned out to be 71.1, that of profit improvement 6.6, and that of value-add 1.7. In specific, technology diffusion to defense sectors resulted in sales increase to R&D investment as 73, that of profit improvement 6.6, and that of value-add 1.6. On the contrary, diffusion to the civilian sectors resulted in sales increase of 40.2, profit increase of 4.4, value-add of 1.7. This difference indicates that the defense technologies largely have been diffused to the defense sector and relatively scarcely to the civilian sector. As a measure to invigorate technology transfer to the civilian sector, this study proposes improvement of defense acquisition system by applying the concept of “marketing planning” from private sector and constructing a national management system for defense technologies.