Against a backdrop of geopolitical fragmentation, the rise of hybrid threats, and intensifying technological competition among major forces, defense budgets are sustainably growing in most advanced economies. Such spending is generally viewed as a response to national security imperatives. However, this interpretation is incomplete. Economic and technological history shows that military spending is not merely a tool for protection, but also a powerful driver of industrial structuring and innovation.

Many major technological breakthroughs—radar, jet engines, GPS, the Internet, composite materials, digital avionics, and embedded artificial intelligence—were developed or significantly accelerated through military funding, before spreading to civilian markets. Today, the line between civilian and military technologies is becoming increasingly blurred, particularly in knowledge-intensive sectors such as aerospace, cybersecurity, embedded systems, and advanced data analytics.

This article argues that defense procurement should be analyzed as an implicit yet decisive instrument of industrial policy. Using the Canadian case as an example—specifically focusing on the Bombardier Global 6500 platform and the Royal Canadian Air Force’s AEW aircraft procurement program—we demonstrate that public procurement decisions are far from being neutral: they have a lasting impact on industrial ecosystems, skills, value chains, and national innovation capacity.

Defense, innovation, and industrial policy

The academic literature frames military procurement as a key driver of innovation and national competitiveness.

Research on the “entrepreneurial state” (Mazzucato, 2013) shows that the state has historically played a central role in technological risk-taking by funding radical innovation initiatives that the private sector would not undertake on its own. From this perspective, major military programs serve as a key driver for shaping emerging technology markets.

Ruttan (2006) demonstrates that the major waves of innovation of the 20^th century—aeronautics, electronics, and computing—are closely linked to military investment, which acts as a mechanism for market creation and the acceleration of technological maturation. The defense sector thus acts as a “launch customer” capable of supporting still-immature technologies until they reach industrial-scale production.

Research on demand-driven innovation (Edler & Georghiou, 2007) highlights the strategic role of public procurement as an innovation policy tool. Public procurement helps create market signals, shape ecosystems, and reduce uncertainty for innovative companies.

Finally, the literature on defense economics (Hartley, 2011; Dunne & Sköns, 2011) highlights that military spending, when integrated into a coherent industrial strategy, can generate significant positive externalities: highly skilled employment, technological advancement, exports, and strategic autonomy.

This theoretical framework leads us to view military procurement not as a neutral expenditure, but as a fundamental choice in long-term industrial policy.

Methodology

The article adopts a qualitative approach based on an in-depth case study (Yin, 2018) applied to the Canadian aerospace sector. This method is particularly well-suited for analyzing complex, institutional, and highly context-dependent phenomena such as the interplay between public policy, industrial strategies, and innovation dynamics.

The empirical data used is based on:

• a literature review of public reports, specialized articles, and institutional press releases;
• the mobilisation of Craig Hoyle’s 2025 article published in FlightGlobal, on the military conversion of business jets;
• an analysis of industry-specific documents and detailed information regarding the Canadian AEW program, available industrial solutions, and international competitive dynamics; and
• a comparison with the academic literature.

The goal is not to arrive at a statistical generalization, but rather an analytical generalization that provides a better understanding of the structuring role of procurement decisions in an advanced industrial context.

Defense and aerospace: a long-standing, structural relationship

The aerospace sector is a prime example of the interdependence between military innovation and industrial development. Jet engines, onboard radar, fly-by-wire, secure communication systems, advanced composite materials, computer simulation, and integrated avionics are all innovations that stem, in whole or in part, from military programs.

Today, this dynamic is still ongoing with the development of so-called “dual-use” platforms, designed to be suitable for both civilian and military applications. Long-range business jets are a prime example of this hybridisation. Originally designed for high-end civilian transport, they have become the platforms of choice for specialized military missions with very high added value.

This phenomenon reflects a profound transformation in industrial models: civilian platforms are no longer merely finished products, but are evolving into open technological architectures onto which sensors, software, mission systems, and knowledge-intensive services are integrated.

Military conversions of business jets: a key market

An analysis published by Craig Hoyle (2025) in FlightGlobal highlights a significant trend: manufacturers of long-range business jets are faced with growing demand from armed forces to adapt their aircraft for special missions.

Aircraft such as the Bombardier Global 6000/6500, the Gulfstream G550, and the Dassault Falcon 8X, are now used for critical missions such as:

• airborne early warning and control (AEW&C);
• intelligence, surveillance, and reconnaissance (ISR);
• signals intelligence (SIGINT);
• electronic warfare (EW).

From an economic perspective, these programs have several structural effects:

• extending the operational life of civilian platforms;
• the implementation of highly knowledge-intensive activities (systems engineering, integration, software development, certification);
• strengthening national value chains;
• strategic positioning in export markets.

Thus, the military market appears to be a strategic extension of the civilian market and contributes directly to the overall competitiveness of the industrial ecosystem.

The strategic opportunity of Canada’s AEW program

Canada has one of the most advanced aerospace sectors in the world, concentrated primarily in Quebec and Ontario, with key players such as Bombardier, Airbus Canada, Pratt & Whitney Canada, and CAE, as well as a dense network of highly specialized small and medium-sized enterprises.

The Royal Canadian Air Force currently plans to acquire eight AEW aircraft, with initial operational capability expected around 2035. However, several factors suggest that a strategic acceleration of the program is possible.

The Bombardier Global 6500 platform, assembled in Canada and integrated into a high-value-added domestic supply chain, now serves as the foundation for two viable solutions:

• the GlobalEye solution developed in collaboration with Saab, which is already operational;
• a solution developed with L3Harris based on the adaptation of proven systems.

The GlobalEye is a mature solution, ready for delivery within a few years, and has already been selected by several air forces. L3’s solution featuring the Global 6500 aircraft was chosen by South Korea for its AEW program last fall. In contrast, the competing Boeing E-7 platform is facing technical, budgetary, and political challenges in several countries, which reinforces the strategic credibility of the Global 6500 ecosystem.

Beyond military capabilities, the choice of platform is a pivotal decision for the national economy. A swift decision would make it possible to:

• build and sustain national expertise in advanced engineering;
• support highly skilled employment;
• position Canada as an export hub for AEW systems;
• strengthen technological and industrial sovereignty.

The funds involved—amounting to several billion dollars over the entire lifecycle—should therefore be viewed as a strategic investment rather than merely an operational expense.

Strategic dependency, supply choices, and Canada’s industrial pathway

This section provides an in-depth critical analysis of Canada’s defense procurement decisions, with the aim of highlighting their structural impact on the national industrial ecosystem, technological sovereignty, and long-term innovation capacity. The objective is not to make a political judgment, but to offer an analytical interpretation of observable trends.

A policy with little focus on industrial sovereignty

Compared to several industrialized countries with advanced technological bases (France, Sweden, Israel, South Korea), Canada has rarely adopted an explicit policy aimed at using defense procurement as an industrial policy tool, despite existing laws that support this approach. In these countries, military procurement is often viewed as a means to simultaneously:

• ensure national security;
• develop a strategic industrial base;
• support domestic innovation.

In Canada, the prevailing approach has long been different. Procurement decisions have generally prioritized criteria such as immediate operational performance and interoperability with allies—particularly the United States—at the expense of long-term strategic thinking regarding domestic industrial capabilities. This approach can be explained in part by Canada’s deep integration into North American defense architectures (NORAD, NATO), but also by a relatively cautious political tradition regarding any explicit form of industrial policy.

Dependence on the United States—a systemic constraint

The asymmetrical strategic relationship between Canada and the United States is a key explanatory factor. In many programs, alignment with U.S. technology choices becomes an implicit imperative, thereby limiting the Canadian government’s leeway. This dynamic creates a form of structural dependence: the more systems are integrated into U.S. supply chains, the more difficult it becomes, subsequently, to develop domestic alternatives.

This dependence has tangible economic and industrial consequences. It limits the ability of Canadian companies to serve as prime contractors on complex systems, reduces organizational learning on large-scale programs, and concentrates strategic added value (system architecture, intellectual property, technological advancements) outside the country.

The case of the P-8A poseidon: a missed opportunity

The acquisition of the P-8A Poseidon maritime patrol aircraft is a prime example of this trend. Without questioning the aircraft’s operational capabilities, it is worth analyzing this decision from an industrial policy perspective.

The decision to select an American platform that is based on an older design (the Boeing 737) resulted in a limited transfer of strategic expertise to the Canadian industry, whereas an alternative solution based on a modern Canadian platform proposed by Bombardier could have generated more significant structural benefits.

From the perspective of innovation economics, this type of decision contributes to maintaining Canada in the role of an advanced subcontractor, rather than a designer and integrator of complex systems. Yet it is precisely these functions—design, architecture, and integration—that hold the greatest strategic value and long-term learning potential.

Supply chain and technology roadmap: a cumulative choice

Research in evolutionary economics show that technological trajectories are highly dependent on initial choices, which we refer to as “path dependence”. In the defense sector, each major program shapes capabilities, infrastructure, stakeholders networks, and organizational routines for decades.

Thus, a program like the AEW should not be viewed as merely a one-time purchase of capability, but as a foundational investment in an industrial development path. Choosing a credible national platform not only maximizes immediate benefits but also creates cumulative learning capabilities that can support future programs (ISR, SIGINT, multi-mission platforms, autonomous systems, etc.).

Technological sovereignty in the age of complex systems

In a world where defense systems are increasingly becoming reliant on software, artificial intelligence, advanced sensors, and data architectures, sovereignty no longer rests solely on the physical possession of equipment, but on the mastery of their key technological components.

A country that does not control the architecture of its systems, its access to source code, the ability to upgrade software, and the integration of new sensors, gradually becomes dependent on its suppliers to develop its own military capabilities. Operational sovereignty then becomes contingent upon technological sovereignty.

In this context, procurement decisions take on a new strategic dimension: they determine not only who manufactures the equipment, but also who controls the system’s intelligence throughout its entire lifecycle.

The AEW program as a potential strategic turning point

In this regard, the Canadian AEW program represents an exceptional opportunity. Unlike many previous programs, Canada now has a credible national platform that is internationally recognized and already integrated into the advanced military capabilities of several allies.

Opting for a solution based on the Global 6500 would allow for:

• building a sustainable core of expertise in complex systems integration, in Canada;
• strengthening the innovation ecosystem in the field of advanced aerospace;
• increasing the capacity to export high-value-added solutions;
• positioning Canada not merely as a provider, but as a designer of strategic capabilities.

Conversely, a choice that replicates past patterns of dependence could further exacerbate Canada’s marginalization in strategic segments of the global value chain.

International cooperation, absorption capacity, and national interest

An analysis of procurement choices should not lead to a binary view that pits national sovereignty against international cooperation. In the realm of defense, these two dimensions are not mutually exclusive: on the contrary, they must be viewed as complementary. The pursuit of technological sovereignty does not mean self-sufficiency, but rather the ability to choose partners, to master key components, and to preserve long-term decision-making autonomy.

In this context, it would be simplistic to view strategic choices as an either-or choice between the United States and Europe. On the contrary, current trends in the defense markets show that programs are increasingly multinational, based on complex industrial partnerships, and that the states capable of capitalizing on this situation are those that know how to balance cooperation with national interests.

Furthermore, the current budgetary context is fundamentally changing the terms of the debate. The significant increases in defense budgets observed since the late 2010s do not create an environment of financial scarcity, but rather a challenge in terms of absorption capacity. In several countries, including Canada, billions of dollars in announced funding were not spent between 2018 and 2023 due to administrative constraints, organizational limitations, and the unavailability of certain mature technologies. The problem, therefore, is not so much one of strict budgetary trade-offs among partners as it is one of ability to design, structure, and implement coherent programs.

This involves clearly identifying the areas where the country wishes to develop or preserve critical capabilities, and building partnerships—whether North American, European, or otherwise—that serve these objectives rather than constrain them.

Applied to the AEW program, this logic suggests that choosing a national platform can certainly be accompanied by international cooperation when it comes to sensors, mission systems, interoperability, or training, all without compromising national interest. The real issue, therefore, is not a choice between partners, but Canada’s ability to define a clear strategy and use cooperation as a lever to advance that strategy.

In conclusion

This article demonstrates that defense spending, far from being merely a security-related budget item, can become a powerful driver of industrial development when integrated into a coherent strategic vision.

The case of the Canadian aerospace industry and the Bombardier Global 6500 platform serves as a compelling example of how a defense program can simultaneously strengthen national sovereignty, support innovation, and bolster the country’s economic competitiveness.

Procurement decisions, therefore, are not merely about acquiring military capabilities; more fundamentally, they amount to investing in a nation’s productive and technological future.

References

Dunne, J. P., & Sköns, E. (2011). Military expenditure and development. In J. P. Dunne & R. M. Smith (Eds.), Routledge handbook of defence studies (pp. 293–308). Routledge.

Edler, J., & Georghiou, L. (2007). Public procurement and innovation—Resurrecting the demand side. Research Policy, 36(7), 949–963.

Hartley, K. (2011). The economics of defence policy. Routledge.

Hoyle, C. (2025). Why military conversions are big business for executive jet producers. FlightGlobal.

Mazzucato, M. (2013). The entrepreneurial state: Debunking public vs. private sector myths. Anthem Press.

Ruttan, V. W. (2006). Is war necessary for economic growth? Military procurement and technology development. Oxford University Press.

Yin, R. K. (2018). Case study research and applications: Design and methods (6th ed.). Sage.

Redefining the Canadian government’s role as an industrial strategist

The analysis suggests that the issue extends beyond the AEW program alone. It raises broader questions about the role the Canadian government wishes to play in shaping its strategic sectors. Far from being an anomaly, the strategic use of public procurement as an industrial lever is now a common practice in many advanced economies.

From this perspective, the AEW program could serve as testing grounds for a more fundamental and profound evolution of the Canadian procurement doctrine: shifting from a primarily administrative approach to a truly strategic one that integrates security, innovation, and economic development.