High-stake collaboration: The private sector’s influence on great power competition

Introduction

When an American fast-food restaurant opened in Moscow in January 1990, it achieved more than just company growth—it advanced US competitiveness and security. The long lines and enthusiastic response from Russians revealed a craving for more than hamburgers and fries; they signified a desire for capitalism and Western experiences in a city that, only a few years earlier, epitomized the very antithesis of American ideals and was the heart of America’s great power rival.¹ Yet, the restaurant didn't open because the company was focused on the Cold War competition; it opened because Russia presented a new and exciting market for growth. That US national security benefited was largely a coincidence. Today, the relationship between private sector decisions and American security is more deeply intertwined than it was then.

The resurgence of great power competition² has once again turned nearly every industry into an arena of geopolitical rivalry. This in turn puts companies on the front lines of competition. Not only do companies need to pay attention to geopolitical risks, but the government must also increasingly rely on the private sector to achieve national security objectives. Whether it’s driving standards in artificial intelligence, preventing another pandemic, or investing in partner nations, public-private collaboration is essential.

Such collaborations to directly achieve security goals have been forged in the past: For instance, during the Cold War, Hollywood and supermarkets were central to “blue jeans diplomacy,” and cereal companies made spy balloons.³ However, too many contemporary collaborations are often intermittent or, like the fast-food example, frequently accidental. Neither is sufficient to enhance American competitiveness and national security against great power competitors.

Great power competition is one of, if not, the most pressing national challenge today because it can influence nearly all aspects of national prosperity, from economic and military success to resilience in the face of challenges like climate change.⁴ The United States uses national levers of power (i.e., diplomatic, informational, military, and economic) to compete effectively. Yet, many of these levers are also mediated through or executed by America’s private sector and the innovation ecosystems, companies, leading universities, and capable nonprofits that reside within it. The extent to which national power is dependent on the private sector is unprecedented, necessitating a renewed focus on collaboration.

Innovative approaches to collaboration are urgently needed, going beyond mere improvements in procurement processes. With great power competition only intensifying, the stakes have never been higher.

Every industry is an arena for great power competition

There are many ways to generate national power. A large military is an obvious source of power, but countries like Switzerland have historically maintained their security with a combination of diplomacy and its critical role in the global economy. Innovation itself has even been considered a separate source of national power.⁵ With many important sources of national power, there are many ways the private sector contributes to that national power. Companies can dominate an important global industry, their innovation can create the advanced material that militaries need to compete, and they can even garner higher trust than government or other institutions. Companies can even support deterrence by denial efforts by improving their own resilience to cyberattacks, supply chain disruptions, and other shocks.⁶

But today, who can use national power and how it can be used to improve American competitiveness and security are evolving. The pervasiveness of the great power competition is transforming every industry and every corner of the globe into an arena of competition. This means that many companies are facing higher geopolitical risk than ever before, but it also opens new pathways by which they can directly achieve national security goals (figure 1). From a government perspective, this means that collaborating with private industry is not only desirable but also imperative to national competitiveness and security.

For example, great power competition in the information domain means there is a tremendous drive to own the narrative on key issues. But the information domain is mediated almost exclusively by social media companies, journalists, and others in the private sector. So, if national security leaders want to sense how narratives are changing or get their own narratives out there, working with those private sector leaders in the information space is essential.

Adversaries are taking notice as well. Other countries are taking steps to more closely tie their own domestic industries to national goals with efforts like civil-military fusion.⁷ At the same time, these countries see the United States and allied companies largely through the lens of great power competition. IP theft, predatory lending, lawfare, and other tactics have been used by US competitors to target commercial companies across industries, universities, and other nongovernmental organizations to undermine the private sector’s influence.⁸ As Rick Luebbe, CEO of a US next-generation battery company, put it, “We worry about industrial espionage every day. It affects our bottom line and national security.”⁹

In a world of great power competition, both government and industry need to collaborate to maximize American competitiveness and security.

Turning synergy into symphony

Collaboration isn’t new to government. As far back as the Revolutionary War, the US government was using private actors to directly achieve national security goals, such as when the Continental Congress commissioned privateers to ravage British shipping.¹⁰ In some cases, collaborations were so successful that they reached beyond their intended effects. For example, the collaboration between the Navy and Hollywood on the film “Top Gun” didn’t just boost Navy recruitment but was so successful that it made its way to the Soviet Union where “Top Gun” was more well known than the USSR’s own fighter weapons school.¹¹

Besides movies, the federal government has a long list of tools available to help stimulate collaboration with industry on national security matters (figure 2).

And this history of collaboration continues to the present day. For example, Jake Cusack, co-founder and managing partner of the CrossBoundary Group, a frontier market investment firm, shared a story about how, together with USAID, they raised an innovative renewable energy investment vehicle for sub-Saharan Africa. Importantly, the government gave a fraction of the money needed and already received it back with a return. “USAID provided just over a million dollars in first loss that reduced risk to catalyze the private sector to invest US$8 million initially, and the vehicle has subsequently grown to over US$300 million today. USAID’s willingness to provide early support to a pioneering investment was critical.”¹² Either could have tried to develop such a program independently, but doing so would have missed the complementary strengths each brings to the table.

Unfortunately, while the example Cusack shared is just one of many similar efforts, such efforts are more unique than common, and because of that, too often public and private efforts aren’t as complementary as they could be.

Misaligned incentives make collaboration hard

Incentives are powerful motivators for public and private organizations to collaborate. However, incentives are often misaligned, hampering the ability to forge new and effective collaborations.

A former government leader shared a story illustrating this. A grocer approached his agency seeking assistance to train farmers in Latin America so the grocer could obtain higher-quality produce and the farmers could enjoy steady incomes. The proposal could have been good for the agency, for the communities, and for the grocer. But developing a plan that worked for all parties proved difficult. The grocer wanted to move fast, but the agency wanted to be methodical in evaluating the plan.¹³ The effort eventually fell apart. It wasn’t necessarily that each side didn’t want to cooperate; it was that the incentives—knowledge of processes and resource constraints—to do so weren’t aligned. 

The grocer example exposes a common misalignment between what’s being asked of agencies and what agencies are designed to do. As Colonel Clay McVay, deputy director of Army Applications Laboratory, described, “When leaders in government speak about needing to develop or improve partnerships, what they are really saying is they need to solve specific problems. While the middle layer of government is designed to allocate resources and solve problems, ‘more or better partnerships’ isn’t a problem to solve, so solely allocating resources around partnerships doesn’t always support the development of solutions.”¹⁴ That’s because calling for more partnerships doesn’t necessarily address the incentive motivating how different agencies act or even how different teams within the same agencies act.

Where incentives tend to break down

For collaboration to work, incentives need to align in several stages: First, collaborators need to be aware of the opportunity to collaborate; next, the potential collaboration shouldn’t feel so risky that it threatens core equities like mission or the bottom line; next, the parties need the resources to collaborate; and finally, there needs to be sufficient return to make the effort worthwhile (figure 3).

Misaligned incentives can obstruct the type of collaboration necessary to maximize American competitiveness and security in a few important ways.

The first barrier to collaboration is a lack of knowledge or awareness that collaboration could even help. Business leaders from across various US industries communicated a perception that national security was something that impacted the company but that it wasn’t something the company could influence.¹⁵ As one private sector leader we spoke to noted, “It’s not always clear why a company should invest in understanding geopolitics when it’s the government’s job.” While many private sector organizations do think about the impact of geopolitics on their business, not all think about their impact on geopolitics.

Many of the companies we spoke to who suggested they didn’t have a role in national security were making significant investments into global food security, sustainability, public health, and other areas that directly and indirectly affect great power competition and—subsequently—American competitiveness and security.¹⁶ While some technologies, like AI, are more often acknowledged to have a clear role in national competitiveness and security, other critical technologies can still be viewed by the private sector as separate from those things. As one biotech executive noted, “It’s not uncommon for industry to not see their role in national security very clearly; it’s not their market or their area of expertise.”¹⁷ Ultimately, when the private sector isn’t aware of its role in national security, it can be difficult, if not unlikely, for them to see important opportunities to collaborate for national security.

This same barrier exists on the government side as well. As Jim Thompson, a veteran government leader focused on public partnerships for more than two decades, shared, “Working with industry better requires a culture change for most federal agencies, still. They don’t always think to do things with others that they’ve always done themselves.”¹⁸ He went on to say, “It can be hard for government to know what’s going on in industry and what could be important.”¹⁹

Incentives can continue to pull against collaboration. even once an opportunity to achieve both national security and commercial goals is identified. This is particularly acute for government players where incentives can be stacked to reward avoiding risk. “Government tends to like familiar partners; it can be easier to partner and seem less risky,” says Thompson.²⁰ But sticking solely to familiar partners can limit American competitiveness by leaving the ecosystem of ideas, solutions, and opportunities artificially small.

Risk also creates barriers to properly resourcing collaborations. Alexis Bonnell, chief information officer and director of the Digital Capabilities Directorate of the Air Force Research Laboratory, described how incentives within agencies can be skewed to saying no. She noted, “The size of the critic class in government is growing. There are so many people out there whose job it is to poke holes in things, not to create them.”²¹ According to Bonnell, part of the problem is incentives encourage spending too much time on processes—activities that check a box, but don’t necessarily help the mission.²² Ultimately, many of the incentives in government reflect a time when it had lesser reliance on the private sector.

And this sludge could lead industry, with its strong incentives for moving quickly, to forego collaboration altogether. For instance, one industry leader discussed their efforts to invest in developing communities: “When it gets hard to partner, we just do it ourselves. We’d always prefer to partner with the government because these challenges are far too big to solve without partners, but we can’t partner for the sake of partnering at the expense of our goals.”²³

Closer, more regular connections between government and industry can begin to address these barriers, but this too can be forestalled by misaligned incentives. A leading way to share knowledge of opportunities is through personal relationships, but the unique structure of public service with changes in administration and election cycles means that those personal relationships are hard to maintain. “Our ability to work with government depends on personal relationships and government leaders change often,” noted one industry leader.²⁴ Add in the sheer number of government agencies that may touch a problem, and you can quickly have a nontrivial problem in determining the right person to talk to or the right message to listen to. As another executive shared, “It can often be difficult to know what the government may care about or want to partner on because there are so many voices.”²⁵

Ultimately, these misaligned incentives can undermine the return on investment that collaboration offers. As Jake Cusack, co-founder and managing partner of the CrossBoundary Group noted, “There are often high transaction costs in partnering, especially when the activity or goals are more novel, and initial coordination costs are typically sunk costs.”²⁶ Another industry leader noted their company had “taken big [financial] hits working with the government.”²⁷

Of course, government cares about its partners; but for government leaders accustomed to measuring mission outcomes and not profit and loss, it can often be hard to see the hidden costs that collaboration imposes on industry. Former acting secretary of defense and current CEO of the National Defense Industrial Association, David Norquist, summarizes it by saying, “When you add a requirement on industry—even a pro-national security requirement like enhanced cyber security, Cybersecurity Maturity Model Certification program, for example—companies that comply incur higher production costs and loss of market share to those with no similar requirement. So, you need to find a way to compensate those who follow the rule—either the producer or the consumer.”²⁸

The private sector has ample opportunity to act independently from the government in ways that impact great power competition and national security. However, when incentives misalign and collaboration does not occur, these efforts may be counterproductive to national competitiveness and security or not be as impactful to improving either, as they could have been through coordinated efforts. For instance, imagine how competitive and resilient the United States could be if nearly all public and private collaborations matched public and private strengths as well as the CrossBoundary Group example mentioned earlier did. While not every collaboration needs (or can be) that complementary, far too many collaborations become missed opportunities because incentives are misaligned.

Reshaping the incentives of both government and industry players to encourage more collaboration needs to be a priority.

Increasing American competitiveness and security through private-public collaboration

The government and the private sector can consider several steps to adjust incentives to improve collaboration. They include:

Reducing barriers to knowledge

1. Nongovernmental actors should acknowledge their role in national security given the impact of great power competition. Just because a company has a commercial business model doesn’t mean its business doesn’t impact national security or isn’t impacted by it. Nearly two-thirds of CEOs already see how geopolitical risks create risks for their companies, but more education is needed to see how those same companies can help shape national security—and benefit from it in the process.²⁹

• Facilitate two-way communication. Participating in forums where both industry and government can share information can foster a bidirectional flow of knowledge: Government can learn of industry’s pain points and communicate strategic priorities, while industry can see where new risks and opportunities may emerge. Several such forums already exist. As Mr. David Norquist noted, “Organizations like NDIA were created to serve exactly this purpose by promoting collaborations.”³⁰ Importantly, this communication needs to involve the middle layer of government—not just leaders—where plans and activities are executed.

2. Share more “wins” to show industry how their input directly impacts national security.

• Government leaders and public relations personnel should prioritize sharing more information about success stories where the private sector contributed to success in great power competition. Sharing more good news stories can encourage buy-in from the private sector and foster trust and enduring relationships. For instance, as one industry leader noted, “We don’t always know how our support to the government helped them or us; communication tends to be one-way toward the government.”³¹

3. Develop partnership-focused civil servant career paths or skill sets. Similar to how government has developed new roles to account for emerging technologies (for example, chief AI officer), government human capital leaders should develop new career paths that ensure agencies have the skills to manage partnerships. This should include:

• Creating new roles and training such as partnership certifications and chief partnership officers to help better understand the nuances of developing and harnessing private sector partners
• Adding assessments related to external partnerships to annual performance reviews to encourage partnership creation
• Developing a culture that values constantly learning about private sector activities and their impact on government priorities and work

4. Develop tools to help manage and build inclusive partnerships. For partnerships to be effective, both government and private sector leaders need to speak each other’s language. Spending time immersed in the other’s environment can be an effective way to do this.

• Create partnership exchanges. Develop platforms to track, manage, and share information on partnerships across government, making collaboration more accessible. Such exchanges should be available to private sector partners while protecting sensitive information.
• Consider concierge services. Establish dedicated government services to facilitate partnerships on key government priorities (for example, technology needs or mission areas) to streamline interactions and support collaboration across government agencies.

Reducing barriers to risk

1. Adjust risk calculus to include mission benefit. To reduce the sludge that can often stifle effective collaboration before it begins, government leaders should counterbalance employee incentives to avoid risk with new incentives to achieve mission outcomes.

• Avoid creating new oversight or compliance roles without corresponding roles dedicated to mission outcomes.
• Create clear metrics for mission outcomes and include those metrics in any formal risk assessments. This can help counterbalance risk aversion and help take into account the cost of inaction.

2. Formally track new sources of risk. Companies are facing emerging geopolitical risks, but government is not always clear on what those risks are or their cost to businesses. Corporate leaders need to not only communicate how working more closely with the government may present new business risks but also be open to mitigating those risks through collaboration.

• Including the cost of new risks in profit and loss and other annual statements can help corporate leaders clearly communicate to their government counterparts where relief may be needed to encourage cooperation. Similarly, it can also help corporate leaders see where closer cooperation can actually reduce the cost of risk of current operations, for example, by continuing to source materials or accept funding from a risky foreign competitor.

Reducing barriers to resources

1. Alter funding models and procurement vehicles. Develop new funding models that enable agencies to allocate resources “at the moment of need.” This can help government agencies align with commercial business timelines and work at the speed of relevance. Executive branch finance leaders may need to work with Congressional committees to create appropriations that provide agencies with funds allocated to specific national security objectives or technologies but that are otherwise not tied to specific requirements.

2. Align government and private sector timelines around collaboration goals. Having available funding is only half the battle in creating a lasting partnership. Government agencies need not only the money but also the authority to procure. Experiences with rapid acquisition organizations such as the Department of Defense’s Joint Rapid Acquisition Cell and Joint Improvised-Threat Defeat Organization, among others, have shown that quickly getting dollars out the door to create a prototype does not always lead to rapid procurement at scale as a program of record. The same challenge can apply to partnerships outside procurement pathways. The government should adjust processes to ensure it can collaborate and contribute on shorter timelines that account for private sector pressures.

Reducing barriers to return on investment

1. Prioritize partnerships as critical to mission success. Understanding how to develop and grow partnerships should not be considered an extracurricular activity for civil servants; it should be seen as core to more effectively accomplishing the mission. 

• Clarify what is mission-critical. Government agencies should clarify via a unified government list which industries, services, and technologies are vital to the mission to guide effective partnership efforts.

Collaboration through conducive conditions

In the early 1980s, the Reagan administration recognized the importance of petroleum revenue to the Soviet economy. If the United States could deny or decrease those revenues, it would be a significant blow to the Soviet economy, damaging their national economic power and limiting military investment. In some cases, the US government tackled the problem directly, actively collaborating with the private sector to remove price controls, increase production, and drop the global price of oil and natural gas.³² However, these were not the only measures. The administration also put in place sanctions and export control rules that effectively blocked a lucrative Soviet-European gas pipeline.³³ Although these rules were not the result of active collaboration with industry, they did significantly shape industry’s behavior with regard to selling to the Soviet Union, ultimately dooming the gas pipeline and robbing the Soviet Union of badly needed revenue.

This historical example highlights both the power and the inherent limitations of active collaboration (when parties formally choose to work together). While active collaboration can be very effective, it is intrinsically constrained by the number of people who can physically gather around a table or participate in a conference call; there isn’t a table large enough to fit everyone important to major national security challenges.

The government has other tools that can allow for a more passive type of collaboration (figure 4). In passive collaboration, laws, policies, and shared social interests (for example, combating climate change or public safety) shape how the private sector acts, can be effective, and importantly, how it can be scaled to many more participants. In essence, with passive collaboration, government sets the rules of the playing field in such a way that the private sector’s own incentives drive them to work toward national security goals. For example, Softbank’s recent announcement to invest US$100 billion into US emerging technology is likely to be a consequence of the investment conditions set by the Trump administration.³⁴ US companies pulling out of Russia following its invasion of Ukraine due to perceived risk to corporate reputation and other factors is another example of passive collaboration.

When done well, passive collaboration can improve national security by creating synergy between public and private activities. Companies can achieve their own commercial goals while also supporting national competitiveness and security goals. Conversely, poor passive collaboration can leave public and private sectors inadvertently pulling in opposite directions, wastefully duplicating efforts, or partners feeling coerced.

Incentives, however, can also make passive collaboration difficult

Misaligned incentives can also obstruct collaboration by encouraging public and private sectors to unintentionally take duplicative or contradictory action. These misaligned incentives fall into the same categories of knowledge, risk, resources, and return on investment that can hinder active collaboration, but the specific incentives are different.

The foundational issue is again one of knowledge; but, in this case, it’s a problem of strategic empathy. If government is going to set the playing field to encourage certain actions, it needs to know what industry players value to know how they may react. Alexis Bonnell noted, “We often don’t spend enough time thinking about why someone would behave differently.”³⁵ Anne-Marie Slaughter, the president of New America, also spoke to this by pointing out that “the government doesn’t always do enough to evaluate the consequences of inaction.”³⁶

Without a clear picture of what industry values, it can be difficult to fully understand what poses a risk to them. Dan Sheridan, Defense Industrial Base senior program analyst, Office of the Assistant Secretary of the Navy, spoke to this problem: “Taking funding from certain competitors can place IP at risk, which isn’t good for national security. But you can’t ask a start-up not to take funding from our competitors when it’s that or failure.”³⁷ Even rulemaking has its limits; if incentives are strong enough, people will work around a rule. So, when a rule imposes a cost or risk on industry, government leaders need to find ways to make compliance in the best interest of companies. This doesn’t just mean stiff penalties for noncompliance, but it can also mean positive results like guaranteed purchases or preferential access to new markets for those who comply.

Yet, even when collaboration is in a company’s best interest, a lack of resources can still get in the way. Take securing companies from predatory foreign lending as an example. “The government is asking VCs to serve as the filter between adversarial capital and technological innovation, but most VCs are small, lean teams that don't have the bandwidth to do thorough background checks, nor the finances to fund them.” says Aabid Razvi of Overmatch, a VC focused on investing in technologies related to national security.³⁸

On the government side, the challenge may actually be a surfeit of resources. Different agencies may have different perspectives on the same problem and try to use their passive coordination tools to shape the playing field in opposite directions. Paul Scharre, senior vice president and director of studies at the Center for a New American Security, made this point when discussing AI policy: “Some in government want to control the technology to undermine our competitors, while others in government want to reduce constraints to help AI companies grow and dominate the market. Those policies are in conflict.”³⁹ Different incentives motivate different agencies to take different and, in this case, contradictory paths.

Ultimately, passive collaboration is also a story about return on investment. For industry, the focus tends to be on the bottom line. “The private sector tends to care about policy and regulation most because they affect their bottom line, not because they necessarily see a role in national security,” noted Scharre.⁴⁰

When each side is driven by incentives that focus on different priorities and perspectives, it’s natural for their actions to head in separate directions—even with tools like rules and export controls in place. This mismatch not only blocks effective passive collaboration but can also undermine American competitiveness and security. Reshaping those incentives is key to competing at the scale that great power competition demands.

Reshaping the landscape for American competitiveness and security

Setting the conditions for passive collaboration falls primarily on the government. To adjust beliefs and incentives to improve passive collaboration, government leaders should consider:

Reducing barriers to knowledge

1. Improve how government communicates the impact of great power competition and national security impacts on the private sector. The government should consider enhancing its efforts to inform and educate the private sector about how great power competition and national security issues affect them. By increasing awareness, the government can help these private entities understand the potential risks and consequences of not collaborating or engaging sufficiently in the context of great power competition.

• Agencies should proactively inform industry of risks. Agencies consider sharing sanitized versions of risks to industry that they discover through their daily work, similar to how the Cybersecurity and Infrastructure Security Agency proactively shares cyberthreats with industry.
• Communicate with one voice on key issues. While lots of communication is good, on critical issues, the clarity that comes from one voice is paramount. For issues designated as mission critical (see the recommendation in the active collaboration section), national security leaders should designate a lead agency to be the primary voice of the public and industry.

2. Create feedback mechanisms to evaluate and evolve passive collaboration tools. Annual surveys or a dedicated feedback platform for the private sector to share input on national security, great power competition, and collaboration can help the government keep passive collaboration tools relevant.

Reducing barriers to risk

1. Use empathy for private sector pressures to shape effective national security tools. Companies, universities, and other private sector organizations have incentives that can conflict with national security. If passive collaboration mechanisms don’t account for these pressures, they may be less effective and the government may appear an unconcerned partner. For example, export restrictions that impose too steep a cost may increase the rate of circumvention.

Reducing barriers to resources

1. Develop policies that empower interagency collaboration around specific national security goals. The challenge of interagency coordination can make it difficult to align priorities, share resources, and otherwise develop necessary tools for passive collaboration. Different agencies with different goals can find their efforts at shaping industry behavior pulling in opposite directions. Policies that grant authorities to share resources or mandate interagency collaboration can empower government organizations to work together. For instance, Section 1206 of the 2007 National Defense Authorization Act empowered Departments of Defense and State to cooperate on security assistance, which allowed them to communicate goals more clearly.⁴¹

Reducing barriers to return on investment

1. Develop agile regulatory systems to allow regulations to keep pace with technology. Regulations can be an important passive coordination mechanism, and yet, they can be hard to update and can conflict with the rapid pace of technology.⁴² An agile regulatory system can help them stay current and guide the private sector as great power competition evolves national security concerns.

A future defined by strong collaboration

Throughout its history, the United States has thrived on successful public-private collaborations. During the American Revolution, privateers bolstered naval efforts and newspapers galvanized public support. In World War II, industry mobilized to produce armaments on an unprecedented scale. The Cold War saw partnerships that advanced technology and projected cultural influence. Traditionally, the government served as the primary driver of these initiatives.

Today, however, the private sector has evolved from a peripheral participant to a central actor in national security dynamics. Great power competition has transformed the global landscape, intertwining economic, technological, and security domains like never before. The confluence of commercial innovation, blurred public-private roles, and the necessity to defend against adversarial actions has positioned the private sector at the forefront of national power.

By recognizing the private sector’s pivotal role in national security and embracing new, innovative approaches to collaboration, the United States can harness a dynamism that no competitor can match.