MILITARY EXPENDITURES AS A FACTOR IN STRUCTURAL TRANSFORMATIONS IN THE FIELD OF ENTREPRENEURSHIP

Abstract

This study examines the dual nature of the impact of military expenditures on the transformation of the entrepreneurial sector within national economies. It substantiates that military spending acts as a catalyst for the development of high-tech industries, including the defense-industrial complex, cybersecurity, and telecommunications, thereby fostering innovation and technological advancement. Concurrently, the analysis highlights associated risks, particularly the «crowding-out» effect, which involves the reallocation of critical resources-financial, human, and material - from civilian sectors to defense needs. This reallocation may impede the growth of non-defense-related economic activities, potentially stifling traditional entrepreneurship and small-to-medium enterprises. Drawing on global datasets, primarily from the Stockholm International Peace Research Institute (SIPRI) for the period 2015–2024, and employing panel regression models with fixed effects, the study quantifies the relationship between military expenditures (as a percentage of GDP) and structural transformations in entrepreneurship. The analysis incorporates data from the top 10 military-spending countries, including the United States, China, russia, and Ukraine, revealing significant cross-country spillover effects. Results indicate a robust positive coefficient of 2,33, implying that a 1% increase in military spending correlates with a 2,33% rise in the share of innovative enterprises, underscoring the simulative role of defense investments in high-tech entrepreneurship. However, this comes at the cost of potential resource constraints in other sectors, necessitating a balanced policy approach. The findings emphasize the importance of integrating defense budgets with entrepreneurial ecosystems to maximize innovation spillovers while mitigating adverse effects on traditional industries. The study contributes to the literature on defense economics by highlighting the nuanced interplay between military expenditures, national security priorities, and entrepreneurial dynamics in the context of global geopolitical shifts.