Rearmament: The Essential Cooperation and Competition Among Small, Medium, and Large Defense Companies
France has adopted an ambitious 2024–2030 military programming law: 413 billion euros to modernize the armed forces. In practical terms, this means funding its defense industrial and technological base, which comprises 4,500 companies, including nine major industrial groups such as Thales and MBDA, as well as numerous small and medium-sized enterprises. The challenge: getting them to work together in a spirit of “coopetition,” a relationship that blends competition and cooperation. A true Copernican revolution.
Johanna Gast, Montpellier Business School; Chloé Zanardi and Frédéric Le Roy, University of Montpellier
Faced with the Russian threat and a U.S. withdrawal, Europe is rearming. In late April 2025, 16 European Union countries asked Brussels for a temporary exemption from the rules governing fiscal stability so they could invest more in defense. France has not expressed this 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) around a new approach: that of“coopetition.” This blend of cooperation and competition among various actors who historically operated within a client-supplier relationship represents a true Copernican revolution.
Why? The French defense industry is a diverse sector, comprising innovative small and medium-sized enterprises (SMEs) such as Decomatic and Baumier, as well as major defense conglomerates like Thales and MBDA. Does bringing them together under a framework of coopetition hold the promise of a more agile, innovative, and sovereign defense industry? And what successes might this lead to? This is the subject of the doctoral thesis authored by Chloé Zanardi and supervised by Frédéric Le Roy and Johanna Gast.
Defense Industrial and Technological Base (BITD)
The French defense industry is built on an ecosystem centered around a small number of major groups: Airbus Defence & Space, Thales, Safran, MBDA, Naval Group, Dassault Aviation, CEA, Ariane Group, Nexter, and 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, compared to just 1% for major groups.
Major French defense contractors play a pivotal role as key industrial leaders. They handle a wide range of activities, from research and development to the sale of core technologies, as well as the supply of defense equipment and services. Given the armed forces’ growing need for disruptive innovation, these major groups have implemented ambitious strategies and allocated significant resources to research and development (R&D). In 2020, Thales employed 25,000 people in R&D—the majority of whom are based 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 viewed solely as subcontractors. They provide their innovative solutions to prime contractors, but also supply 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 specialized test benches.
Gradual empowerment of small and medium-sized enterprises
French defense SMEs have long operated within a framework of vertical relationships with the sector’s major manufacturers. 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 corporations, many SMEs turned to developing technological innovations for civilian or dual-use applications.
Starting in the 2000s, these SMEs seized the opportunity presented by the emergence of disruptive technologies such as robotics, big data, artificial intelligence, and the Internet of Things. Bolstered 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 derived from expertise developed in the civilian sector. Companies specializing in drones, such as Delair and Novadem, are developing solutions for the French military. Consequently, the traditional subcontracting relationship is giving way to more horizontal dynamics.
“Let’s not be afraid—neither of our own ideas nor of those of others. In short, let’s always innovate. […] We must think globally and 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 versus competition, a hybrid strategy is emerging in the defense sector: coopetition. This strategy, which combines cooperation and competition, allows SMEs to collaborate with major manufacturers on certain projects while maintaining their independence in other segments. Long reserved for relationships between large manufacturers, coopetition between SMEs and large corporations has already been observed in other sectors, as our research in the agrochemical industry demonstrates.
In the defense sector, we are seeing the emergence of asymmetric coopetition strategies, where the agility of SMEs complements the firepower of large corporations. These strategies can take shape through initiatives that promote co-innovation, such as the Cohoma Challenge, organized by the Army, or the Centurion Project, organized and coordinated by the Directorate General of Armaments (DGA). The Cohoma Challenge aims to bring together players in the robotics sector around a common project by forming mixed teams comprising major manufacturers, university researchers, and specialized startups.
Not Invented Here Syndrome
While coopetition holds great promise, several obstacles hinder companies’ commitment to this type of strategy and can jeopardize its success. First, a significant imbalance in terms of resources and market influence persists between SMEs and large corporations. The latter, bolstered by their historical position and their structural, material, and human resources, may be tempted to exploit their dominance and capitalize on the continuing dependence of SMEs on the sector’s major players.
Second, we observed concerns among both co-competitors. For SMEs, the concern is twofold: that their expertise and resources will be absorbed by the large corporation for competitive purposes, and that they will face an uneven distribution of the value co-created through co-opetition. On the part of large conglomerates, coopetition remains a strategy championed by senior management but is still not well integrated into operational practices. The “NIH” (“Not Invented Here”) syndrome, still very much present in these teams, constitutes a major obstacle to co-innovation initiatives.
Without a clear framework, an SME may find itself passing on its expertise without reaping the benefits, or even being sidelined from the project once the innovation has been implemented. Studies by Fernandez, Le Roy, and Chiambaretto show that clear management mechanisms are essential for coopetition to function fairly. This is why a framework is essential to oversee and facilitate coopetition between SMEs and large defense conglomerates.
Rethinking the Role of the Public Sector
In the defense industry, the public sector plays a dual role as both a customer and a regulator. By actively overseeing the industrial landscape, it can play a structuring role in fostering balanced cooperative-competitive relationships between SMEs and large corporations. In particular, it can facilitate direct market access for SMEs by simplifying support mechanisms, financing scale-up efforts, and clarifying operational requirements.
The client regulator can play a useful role in fostering a climate of trust among co-competitors by encouraging more direct communication. The goal is both to raise awareness among SMEs about protecting their intellectual property and the risks inherent in co-competition, and to promote balanced co-competitive innovation practices among large corporations. The DGA, through its mediator orits “Plan for Mid-Sized Companies, SMEs, and Start-ups” (PEPS), can facilitate commercial relations, act as a trusted third party, promote sound contractual practices, and encourage the sharing of strategic information.
Generally speaking, coopetition between SMEs and large corporations in the defense industry appears to be the strategy to adopt 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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