Defense Innovation and the Future of American Competitiveness

November 25, 2014

WASHINGTON (November 25, 2014) –From WWII to the 1957 response to the launch of Sputnik to the 1980s military buildup, U.S. defense investments in research and development not only promoted American security and safety but made a major contribution to U.S. innovation and economic leadership, assisting in the development of a host of industry-defining technologies from the Internet to GPS to the laser. Yet since the end of the Cold War, federal funding for research, including defense R&D, has increased much more gradually and more recently has actually declined. In addition, the 2013 sequestration – which mandated automatic spending cuts to numerous programs including defense research initiatives – has exacerbated the problem.


The Challenges for America’s Defense Innovation, a new report by the Information Technology and Innovation Foundation (ITIF) takes a closer look at America’s defense innovation ecosystem, assessing the current state of U.S. military expenditures compared to historical averages and our international competitors. It then analyzes the impact of the sequestration and limited budgets, the decline of the industrial base for defense needs, and the erosion of domestic innovation generally on the health of the defense research enterprise.


“The United States defense system is still the most innovative in the world, but that leadership is not assured and is in danger of failing,” says Dan Steinbock, Research Director for International Business at the India, China & America Institute and author of the report. “This decline is not only impacting defense innovation and capabilities, but also overall commercial innovation and U.S. competitiveness.”


Steinbock presents a history of defense research development and illustrates how work conducted by the Department of Defense and its contractors is transformed into commercial applications and spurs the creation of new industries often in areas that the original technology was not intended. However, the world is interdependent and other nations have built on this model and are spending significant amounts to boost defense research and successfully transition it to the private sector. This is occurring at a time when the United States has cut back funding for defense R&D and technology transfer initiatives.


“America cannot rest on its laurels and assume we will always lead the world in defense R&D simply because we have in the past,” Steinbock says. “The overall innovation ecosystem needs to be strengthened, and resources must be focused in a smarter way to enhance the overall innovation ecosystem in order to insure the continued development of a robust defense research system. Our future national security and economic health depend on it.”


Read the report.


The Information Technology and Innovation Foundation (ITIF) is a non-profit, non-partisan think tank whose mission is to formulate and promote public policies to advance technological innovation and productivity internationally, in Washington, and in the states. Recognizing the vital role of technology in ensuring prosperity, ITIF focuses on innovation, productivity, and digital economy issues. Learn more at