Rearmament: the essential coopetition between small, medium, and large defense companies
France has adopted an ambitious military programming law for 2024-2030: €413 billion to modernize its armed forces. In concrete terms, this means financing its industrial and technological defense base, which comprises 4,500 companies, including nine major industrial groups such as Thales and MBDA, and numerous SMEs. The challenge is to get them to work together in a spirit of "coopetition," a relationship that combines competition and cooperation. This is a true Copernican revolution.
Johanna Gast, Montpellier Business School; Chloé Zanardi and Frédéric Le Roy, University of Montpellier
Faced with the Russian threat and US disengagement, Europe is rearming. At the end of April 2025, 16 European Union countries asked Brussels to be temporarily exempted from the rules governing budgetary stability in order to invest more in defense. France has not expressed such interest, but in February 2025, Emmanuel Macron raised the idea of increasing French military spending from 2.1% to 5% of GDP.
As France prepares for this potential high-intensity war, the French government is reorganizing its defense industrial and technological base (BITD) according to a new logic: that of "coopetition." This combination of cooperation and competition between different players who historically cooperated as customers and suppliers is a true Copernican revolution.
Why? The French BITD is a diverse sector, comprising innovative small and medium-sized enterprises (SMEs) such as Decomatic and Baumier, and large defense industry groups such as Thales and MBDA. Does bringing them together under a co-opetition model hold the promise of a more agile, innovative, and sovereign defense industry? And what successes might this bring? This is the subject of the doctoral thesis written by Chloé Zanardi and supervised by Frédéric Le Roy and Johanna Gast.
Defense Industrial and Technological Base (BITD)
The French defense industry is based on an ecosystem structured around a small number of large groups: Airbus Defense & Space, Thales, Safran, MBDA, Naval Group, Dassault Aviation, CEA, Ariane Group, Nexter, Arquus; and a large number of SMEs. In 2019, of the 26,452 direct suppliers to the Ministry of the Armed Forces, 84.5% were SMEs and mid-sized companies, compared with only 1% large groups.
Major French defense groups occupy a position as key industrial leaders. They carry out missions ranging from research and development to the sale of technological building blocks, including the supply of defense equipment and services. Given the armed forces' growing need for disruptive innovation, these major groups have deployed ambitious strategies and mobilized significant resources for research and development (R&D). In 2020, Thales employs 25,000 people in R&D, most of them in France, and 3,000 people in research and technology (R&T) out of a total workforce of 65,000.
As for SMEs, they are no longer considered solely as subcontractors. They provide their innovative solutions to prime contractors, but also deliver solutions directly to the armed forces themselves. Exosens develops amplification, detection, and imaging technologies; MC2 Technologies develops microwave technologies for safety and security applications; and Akira Technologies designs and manufactures energy conversion systems and special test benches.
Gradual emancipation of SMEs
French defense SMEs have long operated within a framework of vertical relationships with the sector's major industrial players. The fall of the Berlin Wall, followed by a sharp reduction in military budgets, highlighted the fragility of this model. In response to the decline in government orders to large groups, many SMEs turned to developing technological innovations for civilian or dual use.
Starting in the 2000s, these SMEs seized the opportunity offered by the emergence of disruptive technologies such as robotics, big data, artificial intelligence, and the Internet of Things. Supported by the creation ofthe Defense Innovation Agency in 2018, they were able to return to the forefront by offering high value-added solutions for defense, often based on expertise developed in the civilian sector. Companies specializing in drones, such as Delair and Novadem, are developing solutions for the French army. As a result, the traditional subcontracting relationship is giving way to more horizontal dynamics.
"Let's not be afraid. Neither of our ideas nor those of others. In a word, let's always innovate. [...] We must think globally, not pit small businesses against industrial giants," said Florence Parly, France's Minister of the Armed Forces from 2017 to 2022, in a speech on November 22, 2018.
Coopetition, a promising third strategic path
Faced with the dilemma of collaboration or competition, a hybrid strategy is emerging in the defense sector: coopetition. This strategy, combining cooperation and competition, allows SMEs to collaborate with major manufacturers on certain projects, while retaining their independence in other segments. Long reserved for relationships between large manufacturers, coopetition between SMEs and large groups has already been observed in other sectors, as our research in agrochemicals shows.
In defense, we are seeing the emergence of asymmetric coopetition strategies, where the agility of SMEs complements the firepower of large groups. These can take the form of initiatives that promote co-innovation, such as the Cohoma challenge, organized by the French Army, or the Centurion project, organized and coordinated by the French Defense Procurement Agency (DGA). The Cohoma challenge aims to bring together players in the field of robotics around a common project, by forming mixed teams comprising major industrial players, university researchers, and specialized start-ups.
Not Invented Here Syndrome
While coopetition offers significant potential, several obstacles hinder companies' commitment to this type of strategy and could compromise its smooth implementation. First, there remains a significant imbalance in terms of resources and market influence between SMEs and large corporations. The latter, with their historical position and structural, material, and human resources, may be tempted to exploit their dominance and take advantage of the SMEs' continued dependence on large corporations in the sector.
Secondly, we observed concerns among both coopetitors. SMEs have two main fears: that their skills and resources will be absorbed by the large group for competitive purposes, and that they will suffer from an unbalanced capture of the value co-created through coopetition. On the side of large groups, coopetition remains a strategy promoted by senior management, but it is still not widely integrated into operational practices. The NIH ("Not Invented Here") syndrome, which is still very present in these teams, is a major obstacle to co-innovation initiatives.
Without a clear framework, an SME may find itself passing on its expertise without reaping the rewards, or even being ousted from the project once the innovation has been integrated. Studies by Fernandez, Le Roy, and Chiambaretto show that clear management mechanisms are essential for coopetition to function fairly. This is why supervision is essential to oversee and facilitate coopetition between SMEs and large defense groups.
Rethinking the role of the public actor
In the defense industry, the public sector plays a dual role as both customer and regulator. By actively supervising the industrial fabric, they can play a structuring role in promoting balanced cooperative relationships between SMEs and large groups. In particular, they can facilitate direct access to the market for SMEs by simplifying support mechanisms, financing scaling up, and clarifying operational needs.
The customer regulator can play a useful role in building trust between coopetitors by increasing direct exchanges. This involves both raising awareness among SMEs about protecting their intellectual property and the risks inherent in coopetition, and promoting balanced coopetitive innovation practices among large groups. Through its mediator orits "plan to support mid-sized companies, SMEs, and start-ups" (PEPS), the DGA can facilitate commercial relations, act as a trusted third party, promote good contractual practices, and encourage the sharing of strategic information.
In general, coopetition between SMEs and large corporations in the defense industry seems to be the strategy to follow in order to restore France's innovative and powerful military capabilities.
Johanna Gast, Associate Professor of Entrepreneurship and Strategy, Montpellier Business School; Chloé Zanardi, Professor Frédéric Le Roy, Professor of Strategic Management – MOMA and Montpellier Business School, University of Montpellier
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