Title: Transaction costs and architectural complexity in no-capability defence acquisition

Authors: Alexandre Verlaine

Addresses: Luxembourg Armed Forces, Etat-major de l'Armée, Boîte postale 166, 9202 Diekirch, Luxembourg; Hungarian University of Agriculture and Life Sciences, Doctoral School in Management and Organizational Sciences, Kaposvár University, 7400 Kaposvár, Hungary

Abstract: The paper addresses the research gap between big and small military powers and investigates the challenges in defence acquisition through the perspective of a no-capability NATO nation. First, the author discusses different contractual approaches in no-capability defence acquisition using transaction cost economics and identifies three important transaction cost factors: seconding liaison officers, aligning budget calendars and agreeing on key user requirements. Second, the author inquires the systemic complexity that lies at the heart of modern weapon systems and shapes defence contracts. Drawing on architectural innovation, the analysis demonstrates that small/no-capability NATO nations have a structural disadvantage in relation to developing/acquiring advanced weapon systems. Finally, the author examines the "dual-use development strategy" as a vehicle for overcoming the structural no-capability disadvantage. Two contrasting case studies on Luxembourg and Estonia illustrate the importance of the competent and demanding military customer and the need for further research on the profile of small/no-capability NATO nations.

Keywords: transaction costs; architectural complexity; no-capability defence acquisition; Luxembourg.

DOI: 10.1504/IJPM.2023.134193

International Journal of Procurement Management, 2023 Vol.18 No.3, pp.321 - 339

Received: 06 Jun 2022
Accepted: 14 Jun 2022
Published online: 13 Oct 2023 *

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