Pathways to Space: working hypothesis and approach
Many thanks also to our collaborators in this Pathways to Space article: Arnab Dutt, Gergely Gazdag, Nigel Greenhill, Edoardo Mancini, Karl Manias, Abel Perez-Crespillo and Saurabh Saxena.
How incumbent firms, ventures and other agencies are (re)engaging with the space economy.
The global space economy is burgeoning in scale, diversity of actors, funding sources, and innovative applications of frontier technologies. The days of a few incumbent primes in defence, telecoms, and aerospace working with national space agencies are diminished, displaced by scores of ‘new’ incumbents, ventures at all stages, and many new national space ambitions.
‘Space’ has foundational ties to earth-based jurisdictions and is largely still viewed by strategy scholars as a ‘new market’ in terms of familiar issues of growth, competition, the sources of firm advantage. This work on ‘market entry’ increasingly misspecifies the practical activity of building markets in and for space commerce. In our work on ‘Pathways to Space’ we explore this foundational assumption, using evidence from available studies and our own original research.
We start from a working premise that ‘new markets’ are actively shaped and manifest in the work of incumbent firms, government agencies, regulatory struggles, entrepreneurial activity, media attention, capital allocation, and more. We call this an ‘early moments’ approach to the institutional study of nascent markets. We note that such early moments diverge from commonly understood economic arguments and strategies in several critical ways, that make ‘pathways to space’ a distinctive case for the received wisdom.
Our work shows that government agencies play an active role in the building of new markets, along with many intermediaries.
We also demonstrate that they engage and support private sector investments and development of capabilities in a variety of ways (eg outsourcing, grants, contracts, investments, and investment funding). We find evidence of these, by industry and sector. We document from anecdotal conversations and preliminary research the variety of pathways that firms and others use to engage and co-create space markets.
Private firms engage ‘space’ with a plurality of strategies.
Firms and ventures, make use of a plurality of strategies. In some case, the strategies do not differ substantially from those in incumbent earth-based industries, though there are some nuances.
Aerospace incumbent firms were renowned already in the mid-twentieth century for their excellence in aircraft manufacturing, power systems, propulsion systems and components for aviation and defence. These firms largely leveraged on their core capabilities to enter the space sector as early as the mid 1950s in support of, or with direct involvement in, government funded scientific exploration programmes. We also learned about firms working traditionally in the aerospace and defence sector that entered the market through M&As to augment capabilities in, for example, satellite systems, launch vehicles, propulsion engines for space missions.
But we have also observed that incumbents engage in the space economy with novel approaches, partnering in consortia with startups (eg to deliver space debris removal missions) or even with local authorities- for spaceport and launch capabilities. Aerospace incumbents are also developing their innovation capabilities running incubator and accelerator programmes (often funded by corporate venture capital) to embed new capabilities in their organisations.
Players from the telecommunication industry, leveraging their core business of telecommunications and networks, are also now engaged in the space sector facilitating data transmission for space missions, satellite operations, and communication in remote and challenging environments. As space commerce increasingly turns to innovation in telecomms systems, we observe a renewal of engagement, presence from old telecomms and also new ventures in for example photonics.
‘New Space Ventures’ have been spearheading advancements of this current, commercially-motivated space era, leading with strong focus on business model innovation. SpaceX successfully reduced costs through vertical integration of the supply chain and the introduction of reusable launch capabilities. But we also need to remember that the decision of NASA to outsource launch capabilities to the private sector played a key role then, as it does today with SpaceX’s partnership with the US government on Mars exploration.
Blue Origin was established with a vision to make space travel more accessible and affordable. Its initial focus was on suborbital and orbital flight and development of launch vehicles, and more recently it has been awarded a multi-billions contract from NASA to develop a lunar lander.
Virgin Galactic started with a vision of space tourism with an ambition to make space accessible to tourists and researchers. Unlike Space X and Blue Origin it seems to rely heavily on equity investments, both from sovereign wealth funds and private capital markets.
Space Startups’ are drawing considerable media and investor attention, particularly for their contributions to innovation beyond product and process. We distinguish two distinct categories of space startups, predicated on the scope of their services: 'Space for Space' and 'Space for Earth'.
- ‘Space for Space’ businesses centre on constructing platforms—both technologically and from a business model perspective—to empower other space organisations in developing their operational capabilities in outer space. These include missions for space debris removal, in orbit logistics, satellite refuelling, and also new launch capabilities. While these firms are all private ventures, they still heavily rely on government funding either in the form of cash grants or revenue generating contracts as private sector demand for their services is yet to form.
- 'Space for Earth' firms focus on the creation of new services aimed at companies that are not traditionally part of the space ecosystem and can benefit from it. Overall, the private market for ‘Space for Earth’ services is growing, with use cases across a variety of incumbent industries including agriculture, power and utilities, logistics, finance and insurance. These startups enhance their clients’ existing portfolios by leveraging platforms and technologies developed by other space-related entities. They also refocus us on government and institutional support for co-creating these markets.
Governments around the world and government agencies across any one country are supporting growth of these new ventures through a variety of programmes, which include outsourcing contracts, grant funding, skilled work force visas, supply chain development, and incubator and accelerator programmes.
We also find an increasing number of examples of firms that have an incumbent role in earth-based industries and are exploring how to leverage on their core capabilities and supply chains in the space economy. These firms are exploring new partnerships with startups and leveraging on internal innovation capabilities. We see examples of automotive companies developing lunar landers, pharma companies focusing on microgravity for improving drugs, and logistics companies developing capabilities for in-orbit mobility. This is one segment of firms that illustrates the basis for recognising ‘space is the new digital’, meaning the opportunities in commercial space are changing all industries across all sectors, not simply ‘the space industry’.
In terms or organisation, we also found several firms that are using an appointed space ‘czar’ to manage across these large, often multinational and multi-industry legacy firms. Some firms have pursued an initially-decentralised approach, where various divisions and other business units progress a variety of engagements into the space economy. Eventually there is a call to co-ordinate and/or centralise these activities, often in turn birthing new divisions.
There is a time subscript involved in these processes, where firms may halt or get ‘stuck’ at one or another of these early phases. We have yet to study a large enough sample of firms to break out the pathways by sector or industry, nor do we have reliable data on the internal structures of most of the firms, but the importance of these timed/phased efforts are visible.
Governments funding and diverse strategies support to growth.
What emerges from the above observations, is that governments have consistently played an important role in the shaping of the emerging global space sector, providing sustained support from the “old space” NASA-dominated era, to the “new space” of commercial opportunities.
Contrary to much public rhetoric, ‘new’ space continues to rely heavily on government subsidies and related market-creating sources. Going further, we recognise in the government investments in the space sector, a renewed sense of sovereign aspirations. In fact, over the last two decades we observed the proliferation of 70+ countries with space programmes with public sector spending rising to $117+ billions worldwide in 2023.
In the setting of national priorities and their delivery we observe variance among countries in how they approach the creation of national space agencies, or alternative formats of private commissions, or inter-ministry working committees, and the like.
Growing role and impact of social sciences research on space economy.
Advancements in the space sector are strongly interlinked with progress in advanced technologies such as AI, quantum computing and photonics. It is not a surprise that university departments for engineering and physics have, over the past decades, developed space departments and strong ties with aerospace incumbents and spun-out space companies.
What is interesting today, is that we start to observe an increasing number of universities developing a social sciences-based body of research focused on space, to support industry development and also to better inform government policies. Examples include universities such as Harvard, Arizona State University, Polytechnic Milano, and Oxford, joining early contributors at MIT and a set of other specialty universities like International Space University, Emery-Riddle. The focus is on industry collaboration, gathering evidence of what works and what does not in terms of new forms of policy intervention, scenario planning and a host of recently-launched master’s degrees in leading space ventures or in space policy.
Early lessons and observations from Pathways to Space project.
From our study of this new market of space we are able to draw some early lessons of the approaches adopted by a range of private firms and government actors to create capture value in the space economy:
- Firms engage with standard strategy approaches: leveraging on core capabilities, M&A, business model innovation, partnerships. But there is also evidence of innovative approaches, such as incubators, accelerators, and distributed efforts across business units.
- Government support and impact in today’s nascent space markets remains substantial, but we have moved beyond the era of NASA dominance, to an era with pointed differences in the preferred modes of institutional funding, collaboration, and infrastructure building.
- This leads to a more useful distinction between old space and new space; and also between the typical language of ‘market entry’ used in current strategy and international business research and the language of space as a ‘nascent market’ actively shaped and manifested by the work of a field of public, commercial, and civil society actors.
- At Oxford we have followed our research partner Professor Lucas Kello in the Department of Politics and International Relations to reference ‘smart space’, a recognition of frontier technologies and also sustained public sector engagement and impact.
- Stakeholders in the space economy are asking for new models of long-term funding, architecture of capital investments, compensatory initiatives like ‘space insurance’, and experiments and developments to inform future investments and policy. This is where academia and social sciences research, and policy impact will play increasingly key roles going forward.
At the Oxford Space Initiative, we see this as a starting point for further deep dives and case-studies of individual firms, governments and sovereign space agencies. We are also spearheading the launch of the Pathways to Space ‘collaboratory’, an industry-supported research initiative aimed at developing new research on the new space era. Led by us (Marc Ventresca and Michele Scataglini), the collaboratory is a regular convening place where space industry leaders and researchers can learn together, forge impactful collaboration and nurture next generation of talent.
This is the first of a short series of articles on the space economy, with a focus on further specifics of ‘Pathways to Space’. The next article in the Pathways to Space series looks more closely at the governmental and commercial activities in one recently-entering country – the United Arab Emirates.
