This study deals with military offset trade as a source of industrial and technological development at the national level. The definition of offset is a range of industrial and commercial compensations practices required as a condition of purchase of military related sales in the international trade of weapon systems.
The purpose of this study is to identify the typology of offset trade and to find the factors influencing the size of offset agreements.
Previous literature on the general theory of offset trade and technology acquisition were reviewed, and current situations of the offset trade in each country were preliminarily analyzed. As a result, the research model was derived. Based on the research model, five propositions were generated.
To test propositions, case study and content analysis were undertaken. Specifically, sixteen cases were analyzed at the national level and thirteen cases were investigated at the project level.
The results of this study are as follows:
i) Four types of offset trade were identified based on the content analysis, such as (a) civil industry investment-inducement type, (b) civil industry export-oriented type, (c) defence industry infra-building type and (d) defence industry strategic-promotion type.
ii) The methods of offset trade utilized by each country were various, because of different national policies on the defence industry and different levels of industrial development. For example, the nations with a higher priory on the defence industry and with a higher level of industrial development promote military-product exports and the transfer of high technologies.
iii) The relationship between national characteristics and offset policy type was affected by the degree of technology diffusion and technology capability of the weapon-importing country.
iv) Performance of offset is influenced by offset policy types and negotiation factors such as military relationships, equipment newness, competitive strength and strategic importance.
Throughout this study, several types of national offset trade policy and the determinants of offset trade performance were identified. In addition, some guidelines were suggested, which will be useful in offset policy making and negotiations among nations. More extended studies with a wide range of data on offset trade is needed, even though data availability is limited because of military concerns.
