Which, Gentlemen, leads us into unfamiliar territory.
On the premise that military innovation was by and large not state driven at the time do we remove the military and naval tech investment options? Perhaps there ought to be a radical overhaul of the military advancement path.
What did drive military innovation?
I would argue this. It was driven by four factors. Individuals with a vision (of which there were numerous), technology advancement, experience of war, in particular, defeat, and finally, threat driven.
Thus large dominant states have no need to militarily innovate unless they have an individual of vision. This individual impact would be hampered or helped by the lead/ deficit of the concerned country. The chances of individuals appearing would be driven by the freedom of thought within the state and the type of sovereign. There is also a large element of randomness in this.
Technology advancement will drive military innovation as commercial technology advances are applied in the military realm. How civil technology advances is largely down to trade and infrastructure. I would link it to those two factors.
Experience of defeat will always drive change. This is self explanatory.
Threat driven. This is already in the game as a neighbour bonus factor. But I would make it slightly more complicated, how? I’m not entirely sure.
But I think the above system has to be far more realistic than the current one.