Rearmament: the need for cooperation between small, medium and large defense companies
France has adopted an ambitious 2024-2030 military programming law: 413 billion euros to modernize the armed forces. Specifically, to finance its defense industrial and technological base of 4,500 companies, including nine major industrial groups such as Thales or MBDA, and numerous SMEs. The challenge is to get them to work together in a spirit of "coopetition", a relationship combining competition and cooperation. A true Copernican revolution.
Johanna Gast, Montpellier Business SchoolChloé Zanardi and Frédéric Le Roy, University of Montpellier
In the face of the Russian threat and US disengagement, Europe is rearming. At the end of April 2025, 16 European Union countries asked Brussels for a temporary exemption from the rules governing budgetary stability, in order to invest more in defense. France has not expressed any 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 putting its defense industrial and technological base (DITB) on a new footing: that of " coopetition ". This mix of cooperation and competition between different players who were historically involved in customer-supplier cooperation is a veritable Copernican revolution.
Why is this? France's heteroclite DTIB is made up of innovative small and medium-sized enterprises (SMEs) such as Decomatic and Baumier, and major defense industrial groups such as Thales and MBDA. Does bringing them together in a spirit of coopetition hold out the promise of a more agile, innovative and sovereign defense industry? And how successful are they? This is the subject of Chloé Zanardi's doctoral thesis, supervised by Frédéric Le Roy and Johanna Gast.
Defense technological and industrial base (DTIB)
The French DTIB is based on an ecosystem structured around a small number of major groups: Airbus Defence & Space, Thales, Safran, MBDA, Naval Group, Dassault Aviation, CEA, Ariane Group, Nexter, Arquus; and a very 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 (ETIs), compared with just 1% large groups.
France's major defense groups are key industrial prime contractors. Their missions range from research and development to the sale of technological building blocks, as well as the supply of defense equipment and services. In view of 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 employed 25,000 people in R&D, most of them in France, and 3,000 in research and technology (R&T), out of a total workforce of 65,000.
As for SMEs, they are no longer seen solely as subcontractors. They not only supply their innovative solutions to prime contractors, but also provide solutions directly to the armed forces themselves. Exosens develops amplification, detection and imaging technologies; MC2 Technologies, hyperfrequencies for safety and security applications; Akira Technologies, the design and production of energy conversion systems and special test benches.
Gradual emancipation of SMEs
For a long time, France's small and medium-sized defense contractors operated in a vertical relationship 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 drop in government orders to major groups, many SMEs turned to the development of technological innovations for civilian or dual-use applications.
From the 2000s onwards, these SMEs seized the opportunity offered by the emergence of disruptive technologies such as robotics, big data, artificial intelligence or the Internet of Things. Supported by the creation of theDefense Innovation Agency in 2018, they were able to return to center stage, offering high value-added solutions for defense, often derived from know-how 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 of those of others. In a word, let's always innovate. [...] We need to think globally, not pit the small company against the industrial flagship," reminds 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 avenue
Faced with the dilemma of whether to collaborate or compete, a hybrid strategy is emerging in the defense sector: coopetition. This strategy, combining cooperation and competition, enables SMEs to collaborate with major manufacturers on certain projects, while retaining their independence in other segments. Long reserved for relations between large industrial firms, coopetition between SMEs and major groups has already been observed in other sectors, as shown by our research in the agrochemicals sector.
In defense, we are seeing the emergence of asymmetrical coopetition strategies, where the agility of SMEs complements the firepower of major groups. This can be seen in co-innovation schemes 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 aim of the Cohoma challenge is to unite robotics players around a common project, by setting up mixed teams comprising major manufacturers, university researchers and specialized start-ups.
Syndrome Not Invented Here
While coopetition holds great potential, there are a number of obstacles that hinder companies' commitment to this type of strategy, as well as jeopardizing its success. Firstly, there is a major imbalance in terms of resources and market clout between SMEs and major groups. The latter, strengthened by their historical position and their structural, material and human strike force, may be tempted to exploit their dominance and play on the still existing dependence of SMEs on the sector's major groups.
Secondly, we noted fears on the part of both co-operators. On the SME side, the fear is twofold: to see their skills and resources absorbed by the large group for competitive purposes, and to experience an unbalanced capture of the value co-created through coopetition. As far as large groups are concerned, coopetition remains a strategy supported by general management, but is still little integrated into operational practices. The NIH (" Not Invented Here" ) syndrome, still very much present in these teams, is a major obstacle to co-innovation.
Without a clear framework, an SME may find itself passing on its know-how without reaping the rewards, or even being squeezed out of the project once the innovation has been integrated. The studies by Fernandez, Le Roy and Chiambaretto show that clear management mechanisms are essential if coopetition is to function equitably. This is why a framework is essential to supervise and facilitate coopetition between SMEs and large defense groups.
Rethinking the role of the public sector
In the defense industry, the public sector plays a dual role as customer and regulator. By actively supervising the industrial fabric, it can play a structuring role in fostering balanced cooperative relations between SMEs and major groups. In particular, it can facilitate SMEs' direct access to the market by simplifying support systems, financing the transition to scale and clarifying operational requirements.
The customer regulator can make a valuable contribution to establishing a climate of trust between co-operators by increasing the number of direct exchanges. The aim is both to make SMEs aware of the need to protect their intellectual property and of the risks inherent in coopetition, and to promote balanced coopetitive innovation practices among major groups. The DGA, through its ombudsman orits "plan en faveur des ETI, PME et start-ups"(PEPS), can smooth business relations, act as a trusted third party, promote good contractual practices and encourage the sharing of strategic information.
Generally speaking, cooperation between SMEs and large groups in the defense industry seems to be the strategy to follow to restore France's innovative and powerful military capability.
Johanna Gast, Associate Professor of Entrepreneurship and Strategy, Montpellier Business SchoolChloé Zanardi, Professor and Frédéric Le Roy, Professor of Strategic Management - MOMA and Montpellier Business School, University of Montpellier
This article is republished from The Conversation under a Creative Commons license. Read theoriginal article.