Innovation Trends in the Space Industry. Victor Dos Santos Paulino

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      Introduction

      In 1957, the successful launch of the first artificial satellite, Sputnik 1, led humanity into a new historical period: the space age (McDougall 1982). This new era has given rise to many achievements that have largely gone beyond the scope of space activities. Examples include manned space flights, the Moon landing, and telecommunications satellites. These outcomes are the result of intense innovation efforts guided by the desire to control the space environment, which is poorly known and very different from the terrestrial environment. Space activities have also always been illustrations of what high technology, progress, or a possible future for humanity could be. One thinks in particular of the many science fiction works that are set in the context of life in space and on other planets. In addition to the technological and cultural dimensions, space activities also have a strong military and political significance. The space industry was born out of the desire of the Russian and American military to gain an advantage at the beginning of the Cold War.

For a long time, economic considerations were reduced in the space industry. In institutional markets, competition, prices, and profits were largely dominated by military and political considerations embodied in binding regulations. Examples include the protectionism of defense ministries and space agencies that exclude foreign suppliers from the market. At the beginning of the space conquest, the commercialization of space was not a priority for industry stakeholders. The purpose of putting satellites into orbit was not to sell commercial telecommunications and Earth observation services. However, this situation changed with the end of the Cold War. The commercial market, characterized by international competition and customers seeking to maximize their profits, has grown in size. Conversely, the size of the military and civilian institutional markets has shrunk. The commercialization of space has taken root as a fundamental trend, even if it may have experienced fluctuations. One example is the inflation and then bursting of the “Internet bubble” that impacted the commercial satellite communications market in the second half of the 1990s. We can also mention the acceleration of the commercialization of space that we are currently observing, dubbed “New Space” by industry stakeholders.

With New Space, the commercialization of space has reached a level that gives economic considerations an importance never before achieved. This is a major challenge for industry stakeholders, who must partly redefine space activities in light of these issues. For example, taking into account technological, military, political, and regulatory considerations is increasingly seen as insufficient to ensure the survival of industry stakeholders. Similarly, conducting innovation efforts guided solely by the desire to control the space environment seems dangerous. This effort must now also include the commercialization of innovations. Faced with this new need to take better account of economic considerations, it can be seen that insufficient academic work is available. Some work in history, political science, and law can enlighten industry stakeholders. However, this work is not intended to place economic considerations at the center of their analysis. On the side of economics and management sciences, very little work deals with the space industry and even less with its transformation. The main objective of this book is to fill this gap by proposing a study of the space industry based on innovation management.

      In our opinion, three interconnected innovation trajectories must be studied as a priority to understand the commercialization of space. First, it is necessary to describe the long-term evolution of the space industry in light of economic considerations. It then seems essential to us to characterize the innovation strategies of space firms (e.g. Airbus Defence and Space, Boeing, Thales Alenia Space). Finally, we believe it is important to help existing firms to better diagnose the current acceleration of the commercialization of space.

      The evolution of the space industry in light of economic considerations

      The space industry was born out of the desire of the Russian and American military to gain an advantage at the beginning of the Cold War. How can this type of evolution be described? What role do customers play in this evolution and innovation? Are there any characteristic phases in the dynamics of the space industry?

To answer these questions, we propose to use the industry lifecycle theory (Anderson and Tushman 1990; Gustafsson et al. 2016; Klepper 1997, 2010; Klepper and Graddy 1990; Utterback and Abernathy 1975). This theory is one of the most important for understanding innovation (Dodgson et al. 2008). It breaks down the development of the industry into distinct phases: birth/emergence, growth/takeoff, maturity, and decline. In addition, it identifies several lifecycles such as product, innovation, and adoption. This makes it possible to study the dynamics of an industry according to essential dimensions such as sales and innovation rates. Lifecycle theory will be at the heart of this book, but it has some limitations. First, the influence of demand on the evolution of the industry is poorly understood since attention is generally focused on the role of producers (Di Stefano et al. 2012; Forbes and Kirsch 2011; Saviotti and Pyka 2013). This poses a challenge to understand the evolution of industries in which institutional customers, such as Ministries of Defence, play a major role, as is the case in space (Malik 2017; Mowery and Rosenberg 1989; Scranton 2006; Spencer et al. 2005). Another limitation is that the birth of an industry remains a relatively unstudied phenomenon. (Aldrich and Fiol 1994; Forbes and Kirsch 2011; Nygaard 2008; Zhen and Démil 2015). This seems to us to be problematic because the characteristics of the emergence phase seem to have lasted for many years in the space industry. Examples include low competition, niche markets, and intense innovation efforts.

Studying the long-term evolution of the space industry in light of economic considerations leads us to show that customers have a strong influence on the emergence of the space industry and innovation. By customers, we mean Ministries of Defence, space agencies (e.g. NASA, CNES, ISRO), and commercial satellite operators (e.g. SES, Intelsat, Arabsat, Türksat). First, we show that the space industry is characterized by a long emergence phase that lasts more than 50 years (1). We then show that customers are shaping the industry by helping to create four distinct periods between 1957 and 2011 (2). The influence of customers is observed through the pursuit of five objectives. Military customers have created the industry by pursuing three objectives: military, national prestige, and science and technology. This has led to iconic space programs such as Sputnik and “GPS.” Space agencies (e.g. NASA, CNES, and ISRO) shape the industry by pursuing certain objectives similar to military customers such as those of national prestige and science and technology. However, they also pursue their own objective, that of economic benefits. Their iconic programs have been, for example, the Apollo and the International Space Station programs. Finally, commercial satellite operators have a single objective of their own: the pursuit of profits. By focusing on the weight of the science and technology objective among customers between 1957 and 2011, we observe a slowdown in innovation in the industry (3). Over time, the space industry has become kind of a “sleeping beauty” with underexploited technological and commercial potential.

      These results contribute to an understanding of the long-term evolution of the space industry in light of economic considerations such as the role of customers, innovation efforts, and industry lifecycle theory. These results also extend the scope of the lifecycle theory to the space industry. By emphasizing the central role of customers, we reinterpret the role of supply and demand during the emergence phase. We also observe that the pursuit of profits remains a secondary objective for customers during the emergence phase.

      Innovation strategies of space firms

      The slowdown in innovation observed in the space industry is leading to the emergence of a paradox. Satellites are high-tech products that carry few recent electronic components and are developed through processes largely inspired by what was done in the 1950s. How should the conservatism of this high-tech industry be interpreted? Are the innovation strategies of satellite producers irrational and do they jeopardize their survival? On the contrary, do space activities require a certain inertia?

We have chosen to refer to evolutionary work СКАЧАТЬ