The quantum revolution is gaining momentum. Already, quantum sensors and communication devices are changing how people manage and protect both digital and natural assets. On the horizon, quantum computers and simulators promise to unleash previously unimaginable capacities, directly implicating national security. These capacities manifest in two key ways: enabling new applications that solve computational problems and provide unique insight into material properties that classical computers cannot, and supercharging the capabilities of algorithms through enormous efficiency gains. The extent and direction of innovation in the quantum field will crucially depend on the industrial organization of this nascent sector.
Currently, large companies — including Google, IBM, and Microsoft — are among the biggest players in the emerging quantum sector, with incumbents like IBM reporting $1 billion in cumulative revenue from quantum technology sales alone. Smaller, specialized players, like D-Wave and Quantinuum, count Big Tech founders and other large corporations among their leading investors. However, incumbents’ extending their reach into this technological frontier, leveraging their vast financial resources and infrastructural control, impede and distort innovation. To harness quantum’s full potential, governments should create a market environment conducive to strategic innovation.
Foundations for Quantum Breakthroughs
Strategic innovation begins with sustained public investment and institutional capacity. It accounts for legitimate security interests and democratic values. It is conscious of the technology’s dual-use capabilities and cognizant of the great-power realpolitik at the global level. It ultimately envisions an active and creative public sector that fosters basic research and sets the foundation for vibrant market growth and progress towards societally beneficial goals.
Quantum technology is quintessentially dual-use. Its code-cracking potential on the one hand, and the capability to enable truly secure communication on the other, have been of great interest to intelligence agencies and militaries. Its promise to support much more complex simulations, enable reliable navigation, and enhance detection of stealth objects may render strategic advantages, from arms development to battlefield planning. In short, quantum technologies — alongside AI — bear some of the greatest technological promise to any country eying an edge in the emerging great power competition.
However, a technology’s strategic relevance is not limited to direct adversarial deployment. Geostrategic and, ultimately, military power largely hinges on industrial capacity and innovation. And here arguably lies the greatest potential of quantum technologies. Especially when paired with other revolutionary technologies like AI, quantum may unleash a new cycle of innovation and economic growth built on information processing efficiency, leading to new opportunities. These breakthroughs can stimulate entirely new industries — from drug and materials development to environmental monitoring and imaging diagnostics. Strategic innovation will offer countries not only economic advantages, but also geostrategic leverage.
While quantum technologies exhibit much promise, both significant foundational and practical challenges remain. And absent significant technical breakthroughs, many envisioned applications will never see the light of day. Against this backdrop of enormous — yet uncertain — potential, a positive vision for innovation is imperative. Harnessing today’s generation of science and engineering prowess for strategic innovation will profoundly impact tomorrow’s economy, society, and geo-strategy.
Three Pillars of Strategic Innovation
Strategic innovation in quantum technology rests on three core pillars: i) a capable public research ecosystem, ii) an enabling open market, and iii) appropriate regulation. The first pillar involves the basic ingredients of breakthrough research: public funding and risk-taking, functioning institutions and supply chains, and open knowledge ecosystems. Governmental capacity and security are essential underpinnings. Reduced public investment and institutional erosion would derail progress, undermine national security, and ultimately prove very expensive in the long run.This is especially critical in the context of heightening global competition. While the United States continues to lead in global quantum market capture, its investment into quantum science and technology is dwarfed by China, which is signaling its desire to be a formidable challenger in the space. If the United States wants to maintain its dominance in this area, public investment is not just desirable–it is a strategic imperative.
As creative environments matter just as much to innovation as market incentives, nurturing research institutions — from universities to government labs to non-profit initiatives — will significantly contribute to defining technological supremacy in great power competition. Quantum is most suitable for a government-led framework for strategic innovation at this nascent stage. World-leading research is clustered at a few universities and public research institutes using costly equipment, and the first downstream applications are military-, security-, and health-related. Given the nature of the “quantum race”, coordination with allied nations is essential to resolve key technical hurdles in the public research sphere, particularly those that address mutual defense, navigation and surveillance objectives. At the same time, working with trusted partners would speed up the time to market for beneficial civilian applications.
There has been a recent shift in major technological advances originating in industry labs, rather than academia. Today, the private sector accounts for roughly 80 percent of quantum investments, driving a burgeoning global market valued at $1.45 billion. The nature of industrial competition means that quantum advancements are now increasingly locked up in trade secrets. A thriving industrial ecosystem is generally seen as a positive advance; however, early private sector dominance risks steering innovation toward short-term profitable applications and away from basic research with the highest social returns on investment. This highlights an increasingly urgent gap for public funding to fill, especially considering China’s recent multi-billion-dollar quantum commitments.
Second, quantum innovation thrives in open markets that enable and incentivize nascent competitors to scale up and replace incumbents. This will require rigorous antitrust enforcement, pro-competitive regulation, and mission-oriented government procurement. Tighter merger control plays a vital role in preventing hostile acquisitions and re-establishing IPOs as more attractive exit strategies. Restricting unilateral abuses of control over technological bottlenecks can open access to foreclosed markets and market segments. All of this will help translate research breakthroughs into commercially viable applications and attract engineering talent. Policymakers should proactively prevent existing tech incumbents from entrenching themselves in emerging quantum markets similarly to calls for pro-competitive AI regulation. Governments can leverage their significant procurement power to test, validate, and scale quantum technologies in concert with small and medium-sized enterprises, serving as early adopters and first customers.
Third, effective regulation should strike a balance: mitigating technological risk without stifling innovation. Focusing on end-use is generally preferable over attempts to broadly regulate technologies themselves. The quantum-specific risks of novel secure technology (crime and terrorism, for example) are too different from those related to increased computational capacity (surveillance and cyber-attacks, for instance) to be regulated uniformly. Nor are their technical specifications necessarily congruent. Security measures must serve to enhance the collective commercial interests of a technology alliance, including agreement on technical specifications relating to export restrictions, to counter threats posed by foreign adversaries.
Leading in the Quantum Race
To propel strategic innovation forward, a clear definition of “dual-use quantum technology” and related policy measures that strike an appropriate balance of economic, security, and social-benefit considerations are essential. In defining environments for innovation, the United States can learn from past cycles of technological innovation — such as the Internet and the web — which grew out of a combination of direct government investments in research, the contributions of universities, and pro-competitive policy. Major advances in material science and wireless technology originated in Department of Defense programs before they were commercialized through open standards. Restraints on copyright enforcement have enabled search engines and now large language models to train on vast amounts of data and scale quickly.
At the same time, declining antitrust enforcement and a lack of regulation have consolidated the digital economy and diverted engineering talent to commercial endeavors of contested societal benefit (e.g., optimizing advertising algorithms). The former is stifling follow-on innovation, the latter is linked to fueling addiction instead of well-being.
If democratic countries want to retain leadership in quantum technology, they must embrace a vision of strategic innovation. This requires open market ecosystems and greater international coordination in response to China’s growing ambitions, supported by forceful public investments and appropriate regulation. In an era of great power competition, strategic innovation will determine not just technological leadership, but also economic and geopolitical power.
The authors gratefully acknowledge the research assistance provided by Grace Wright and feedback and insights from Tina Dekker.
