Institutional risks and investment barriers to the innovative development of Ukraine's defense industry in wartime conditions

Abstract

The article is devoted to the study of institutional risks and investment barriers that hinder the innovative development of Ukraine's defense industry under wartime conditions. The aim of the research is to comprehensively examine the factors limiting the effective functioning of the defense-industrial complex in the innovation sphere, as well as to develop practical recommendations for overcoming these obstacles. The methodological framework of the study is based on a systematic approach combined with comparative analysis, expert assessments, statistical data analysis, and the examination of current legal and regulatory acts. Additionally, a structural-functional analysis of the institutional environment of Ukraine’s defense industry was applied, taking into account the specifics of wartime. The study identifies a number of key institutional dysfunctions in the field of state regulation of defense innovations. These include fragmentation and obsolescence of the legal framework, excessive bureaucratic procedures, underdeveloped mechanisms of public-private partnership, and limited coordination between research institutions, engineering centers, and manufacturing enterprises. The main investment barriers are defined as high wartime risks, lack of long-term financial resources, complex permitting procedures, and the absence of stable state guarantees for investors. It has been established that institutional inefficiency reduces the investment attractiveness of Ukraine’s defense sector by 30–40% compared to the pre-war period. The conclusions emphasize the need to reform the system of state management of defense innovations. This includes the creation of specialized institutions to support investors during wartime, the enhancement of public-private partnerships, the attraction of international investments and technological assistance, and the modernization of the legal framework in the field of security and defense. It is proposed to develop a strategic vision for the innovative development of the sector, taking into account new geoeconomic challenges, the transformation of global supply chains, and changes in the nature of warfare in the 21st century.