This report set out to analyse emerging transatlantic defence innovation systems and the extent to which EU and NATO efforts in the domain overlap, are in conflict or have potential synergies. The overarching finding is that EU and NATO systems are separate but heavily interdependent. They are separate in terms of membership, governance structures, legal regimes and the way financial resources can benefit innovation in non-member markets. However, they are interdependent in the sense that they cover similar fields, their memberships are similar, investments – both financial and human – in one setting will affect the resources available in the other and the end-product can benefit the security of both.

NATO established its Defence Innovation Accelerator for the North Atlantic (DIANA) in 2022 as an initiative to accelerate and promote transatlantic cooperation on the development of critical technologies and to harness civilian innovation to solve critical defence- and security-related issues. It has also established the NATO Innovation Fund (NIF) as the world’s first multi-sovereign venture capital fund to invest in start-ups and to provide funds to develop emerging dual-use technologies. Questions remain regarding engagement from member states, in particular the US with its highly guarded defence innovation system, and how innovation within NATO will be affected by the lack of a common regulatory regime on new technologies.

The EU established a defence innovation hub (HEDI) at its European Defence Agency in 2022, streamlining existing innovation work and adding new tasks. It seeks to attract non-traditional defence actors using challenges and prizes. In parallel, the European Commission has established a defence innovation scheme (EUDIS) using test hubs, hackathons, matchmaking and a defence equity facility to find synergies between civilian and military research, and support innovative companies entering the defence market. To what extent the funding will be sufficient and there is political will to support these measures, and how common procurement and export control regimes might impact defence innovation remain unclear.

The synergies, overlaps and gaps are many. On a positive note, the two organizations increasingly view defence innovation and emerging and disruptive technologies (EDTs) in a similar fashion. One area of potential competition is the security and ownership of intellectual property rights (IPRs), where protection of IPRs differs in an EU and a NATO context. Another area of friction could be funding, where the extent to which either organization could benefit from financial resources that stem from the other’s innovation system is unclear. In addition, both the EU and NATO are public bodies that are destined to want to justify public investments in defence. This is likely to lead to a potentially worrying situation in which an extremely low risk approach is adopted, where organizations only fund those defence innovation projects that they deem to have a high chance of success.

Member states that want to maximize the benefits of either system should consider the areas of activity set out below.

Work to integrate the two innovation systems by:

• Increasing staff-level coordination between NATO’s DIANA and the EU’s HEDI and EUDIS.
• Establishing more common ground on the policy and regulatory issues surroundingcritical technologies using existing avenues such as the EU-US TTC.
• Working jointly with the EU and the US on securing access to the raw materials requiredfor many emerging technologies, such as rare earth minerals.Nurture national ecosystems by:

• Speeding up the domestic innovation cycle and establishing novel procurement procedures that are more accommodating to smaller companies entering the defence market.
• Establishing avenues that can bridge cultural and knowledge barriers between public agencies, military forces, traditional defence industry prime contractors and smaller companies and start-ups in the field of EDTs.
• Ensuring that national export control regimes do not undermine national interests in international defence innovation.Manage the politics of innovation in the EU and NATO by:

• Conducting a thorough assessment and prioritization of the sort of innovation a member state hopes to achieve or requires, the value that can be added to each or any available innovation system, and which organizations and modes of working are best suited to the national innovation system and its industrial set-up.
• Leveraging bilateral and mini-lateral cooperation to maximize the benefits of cooperation in a multilateral setting.Secure outreach and engagement by:

• Actively informing the target audiences for EU and NATO measures about initiatives that might not be on their radar.
• Investing in secondments to accrue and bring back knowledge to national systems.
• Engaging with the armed forces as end-users when strategies for international defenceinnovation cooperation are written and actions are implemented.

Politea, 2023 (written with Björn Fägersten and Charlotte Kleberg)

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