Public–private partnerships in fostering outer space innovations

After synthesizing the existing literature, the following six innovative fields, or “research clusters,” are likely to emerge as dominant space sectors over the next couple of decades; the current progress accomplished by private and public entities are listed in Tables 1–6.^‡${}^{,}$^§ The first cluster is space transportation and logistics, in which research and development related to vehicle launch systems have been directed toward efficient production methods (i.e., reusable rockets and 3-D printed spacecraft) to lower transport costs of payloads and passengers (1, 6). The second field is in-space manufacturing (ISM), or the application of additive manufacturing in low-Earth orbit and in situ resource utilization, which have become a cost-efficient source for in-space consumption of necessary goods (7–11). By leveraging microgravity, ISM can also provide high-grade goods (e.g., ZBLAN fiber-optic cables) for consumption on Earth. The third research cluster is bioproduction, which is the production of organs (12–19), tissue chips, and drug therapies (20–27) under microgravity conditions as well as disease modeling (14, 28–34). The fourth innovative field is in nuclear launch and propulsion, which utilizes nuclear energy to potentially substitute current fuel sources that use chemical reactions as propellants (i.e., hydrolox and kerolox) (35–37). The fifth is space agriculture, as the production of food in space via controlled environment cultivation (38–40) and additive manufacturing (41–43) will lower food transport costs as well as make viable long-term space exploration and civilization. Last, the sixth is satellite services and maintenance. By expanding the scope of satellites to include quantum communication and remote sensing capabilities (44), the potential to strengthen the secure data and observation industry would unlock new economic opportunities. With the proliferation of satellites, servicing and debris regulations will also need to emerge (1, 45, 46).

The expansion of space-based economic activities will result in several implications for various industries on Earth. As the space transportation sector reduces launch costs by achieving scale and efficiency in rocket production and reusability, an increasing number of firms would be encouraged to invest and develop space-based goods and services. Although the majority of goods will remain more cost-effective to produce on Earth, in-space manufacturing (ISM) of essential components and tools to be used during missions and a varied food supply via in-space crop cultivation and additive manufacturing^¶ would significantly diminish or even eliminate the need for resupply missions from Earth.

This allows the reallocation of resources to be directed toward the production of highly valued goods, such as organ and drug therapies, which have the potential to alleviate the supply bottleneck of high-quality drugs and organ transplants in the biotechnology and healthcare sectors.^# Redistribution of investments and resources can also be allocated to develop new and existing infrastructure in space, especially satellites and communication networks, which can improve productivity on Earth. This provides the necessary foundation for advancing quantum computing, encryption, and communication services as well as refining remote sensing capabilities. Consequently, there is potential to expedite discoveries in the Big Data, finance, agriculture productivity, natural resource management, and climate sciences sectors as well as national security.

As demand increases for space-related goods and services, it is possible for the space transportation sector to experience a “virtuous cycle”: Increased demand for launches and missions would result in higher revenues and retained earnings, which can be used to invest more into high-risk and capital-intensive R&D, such as nuclear thermal/pulse propulsion technologies. Such major breakthroughs and innovations would enable launch companies to offer lower prices for logistics services and thus expand their market penetration.

As the virtuous cycle continues, the overall space economy would allow the expansion of new markets and opportunities, generating public interest and support for space initiatives. One possible initiative is to develop specialized educational programs and training in space-related fields, such as space resource management and engineering, to nurture the next generation of space scientists and entrepreneurs. Not only would this offset the job displacement in Earth-based industries but also contribute to the growth and diversification of the space economy.

Historically, public–private partnerships (PPPs) between NASA and commercial enterprises have successfully encouraged private-sector research and development in the space industry. NASA’s dependency on private contractors was evident since the 1961 Project Mercury and has only intensified, as observed by the 2006 COTS program, 2008 CRS program, and the 2017 Artemis program (45, 47, 48). With a multitude of policies that promote PPPs, such as the 2010 National Space Policy and the 2004 Commercial Space Launch Amendments Act, several major defense contractors and space companies have not only strengthened the United States’ spaceflight and satellite capabilities but also ushered in new industry sectors (49, 50). Recent initiatives under NASA’s Space Technology Mission Directorate display a strategic approach to utilize “spin-in” technologies from other industries (i.e., additive manufacturing, biotechnology, and quantum computing sectors), which have the potential to help form the foundation for breakthrough technologies in the space sector.

These initiatives, coupled with the maturity of launch companies and declining launch costs, spurred commercial enterprises and partnerships to invest, participate, and innovate in the space industry. In order to advance the rapidly evolving space frontier, a public–PRDP (PPRDP) structure could be instrumental. Such partnerships have the potential to significantly enhance the development and application of technological innovations and novel research findings in space. In such a structure, there are three major participants: NASA, which creates opportunities for public good research and overcomes coordination failures; research universities that provide a present and future workforce capable of pushing out the frontiers of both basic and applied fundamental research; and private companies, who provide financing, proprietary data, and collaborative researchers.

In the establishment of any PPRDP, preliminary work must be done to assess the relative research strengths, assets, and commitments of various potential partners (5). Such assessments will be particularly important with regard to research university partners as well as private sector partners. In this respect, preliminary evaluations for the inclusion of critical partners are as follows:

A well-structured PPRDP will expand the network of private companies interested in participating in joint research with research universities and government agencies in efforts to capture increasing returns to scale from R&D. Ideally, a PPRDP would also include a proximity provision for all partners to have a physical presence near each other to promote positive agglomeration externalities, namely, externalities stemming from a concentration of firms and sectors in close proximity with one another that makes it easier to achieve scale economies. Agglomerated regions would experience an increase in intellectual activity and firm productivity, which can be reflected by higher wages, the number of patents filed, or greater revenue generation in comparison to a similar city or region (60–62).

There are two major categories of agglomeration externalities: i) Marshallian-type externalities occur in which industrial localization of a specific sector can lead to external economies of scales via knowledge spillovers, labor pooling, and input sharing (63–65). ii) Jacobs-type externalities stem from the clustering of firms from diverse sectors, which can lead to creative insights and knowledge spillovers that have interdisciplinary and cross-industry benefits to productivity; in other words, cross-fertilization of ideas and knowledge is possible even in random and unplanned interactions due to close proximity (66, 67).

One major agglomeration externality is the knowledge spillover effect, which is the low-cost exchange of ideas between an originating firm and a recipient firm (68, 69). Agglomerated regions promote incidental contact, making knowledge spillovers more likely. By enabling firms to access knowledge from others, industries can adopt best practices and accelerate learning, resulting in unique discoveries and innovations. This can lead to increased returns to scale of R&D.^¶¶ An agglomerated region can generate additional benefits from close proximity to research institutions (e.g., universities) for knowledge creation and spillovers (71–73).

Agglomerated regions also experience labor pooling and resource sharing between firms. Because some workers can become associated with a new firm, and if similar companies with similar needs, qualifications, and other labor hiring criteria are in close proximity, workers are able to borrow knowledge and skills from each other in industrial clusters over a short period of time. Enterprises have the opportunity to recruit trained employees with ready-to-use knowledge and skills, which reduces the cost of training staff. There also occurs a positive feedback loop in which labor pooling may attract skilled labor and relatively higher human capital in agglomeration regions due to the professional development opportunities. Similarly, firms share common infrastructure (i.e., transportation and communication networks) as well as service and supply providers, which result in cost savings and increased productivity from economies of scale.

Because firms in agglomerated regions can share resources and human capital, they are also implicitly sharing economic risks, such as fluctuations in the labor market, consumer preferences, or even shifts in regulation. This allows firms to be less risk-averse since industry risk is implicitly hedged by the collective network of similar firms. In regions with a cluster of diverse sectors, industry-specific economic shocks would be mitigated by the diversification across sectors, providing resiliency to agglomerated regions.

The space sector is in a unique position to benefit greatly from both Marshallian and Jacobs externalities due to the heterogeneity of firms in different lifecycle stages. Startups and early-stage firms can learn from and collaborate with established firms, while the latter can benefit from the agility and innovation brought by newer entrants. For example, the rise of partnerships between space logistics startups and a variety of established firms from the biotechnology sector to pursue novel applications of biotechnology in microgravity settings is a clear indication of the increasing scope of innovation in space. This dynamic environment can lead to faster innovation cycles and a greater capacity for adaptation to changing market conditions and technological advancements.

Heterogeneity among agglomerated economies highlights the importance of a network vs. firm-based organization system in promoting externalities and cross-disciplinary research. While Silicon Valley’s high technology sector is the quintessential example of localized and urbanized agglomeration, the regional cluster of technology firms in Route 128 beltway in Boston had a chilling effect on potential agglomeration externalities. Saxenian points out the key difference in their network vs. firm-based organizational system: While Route 128 did not deviate from conventional corporate structures (i.e., centralized authority via tight hierarchies, vertically integrated firms that promoted self-reliance, and closed-door policies), Silicon Valley promoted open labor markets, loose company hierarchical structures as well as social networks between competitors, and other research institutions with vast “absorptive capacity” (74, 75).^## In other words, Silicon Valley can be characterized as one vast network with localized technology firms that were competitors but also frequent collaborators in both intellectual output and labor pooling, ultimately resulting in Marshallian externalities. This also allowed for the advent of diverse, cross-disciplinary sectors such as FinTech, MedTech, BioTech, FoodTech, AgriTech, and HealthTech, complementing Marshallian externalities with Jacobs externalities for consistent growth in innovation (77). This signifies the importance of leveraging spatial proximity to develop a decentralized network of firms with institutional and governance flexibility in order to capture agglomeration externalities.

As noted in our introductory section, space is an open-access resource. The nature of the resource is recognized in the 1967 Outer Space Treaty (OST), to which 113 United Nations member countries are party, permit access to space by any nation or entity, and prohibits ownership claims of celestial bodies such as the Moon (78). Additional provisions in this treaty and subsequent agreements discourage the generation of harmful environmental contaminants, detail liability clauses for damages to foreign assets, and promote multilateral cooperation and mutual assistance during space exploration.

With the lowering of barriers to entry resulting from the ongoing commercialization and innovations in the space launch system sector, global competition can be expected to increase dramatically for in-space goods and services over the next few decades. As a result, the degree of support for cooperative ownership has diminished; this is reflected in the most recent United Nations treaty: The 1979 Moon Treaty has only 18 parties (in contrast to 113 parties in the OST), with Saudi Arabia withdrawing from the treaty in January 2023 (79). Domestically, the 2015 US Commercial Space Launch Competitiveness Act has established property rights for any resources in space returned to Earth. More recently, the 2020 Artemis Accords have further undermined the OST with the specification that “the extraction of space resources does not inherently constitute national appropriation under Article II of the Outer Space Treaty” (48). Sixteen countries have signed the Accords, and three signatories, namely Japan, Luxembourg, and the United Arab Emirates, have already enacted domestic legislation to protect space property rights.

As the in-space economy evolves and becomes mature, disparities between established firms and newcomers may arise. Companies that acquire market power, perhaps resulting from the enforcement of exclusive intellectual property rights, will hinder competition and innovation while creating negative environmental externalities like space debris and low-Earth orbit congestion. Furthermore, since space is a global commons, addressing market failures and promoting public goods through government intervention is challenging as hegemonic actions infringe on the sovereignty of other nations. This situation could eventually turn outer space into a depleted common pool resource with minimal ex-post correction opportunities.

Hardin’s argument (80), extending Lloyd (81), asserts that open-access resources require centralized authority to avert catastrophes. Coase, however, offers a counterargument in which under specific prerequisites of low transaction costs, well-defined property rights, and perfect information, parties could negotiate and manage resources efficiently (82). Ostrom (83) presents an alternative framework to Coase (82), proposing sustainable management of common pool resources through collective action and self-governance. Local ecosystems such as pastures and irrigation systems have been successfully managed using Ostrom’s “polycentric governance” model that is reliant on similar factors (i.e., low transaction costs, uniform values, and incentives) (83, 84) (Polycentric governance refers to multiple, overlapping decision-making centers that cooperate together to manage resources).

In the case of international regimes such as those needed for space exploration, the application of Coase bargaining and Ostrom’s polycentric governance faces significant challenges. In the case of Coase, property rights for outer space resources are not well articulated, and there exist high transaction costs to enter space, which clearly have a chilling effect on any bargaining that takes place. In the case of Ostrom, diverse actors with varying preferences and power disparities make consensus for stable self-governance difficult to achieve. The enforcement of agreed-upon rules without a centralized authority, and the absence of adaptive governance mechanisms to mitigate conflicts, could potentially undermine the efficiency of Ostrom’s governance strategies.

The principles of polycentric governance, however, can be used to structure PPRDPs to increase open-access research output. Private participants who recognize the continuous and interactive relationships between applied and basic research that have been described in Section 2 are provided the opportunity to develop the open-access research agenda. Furthermore, open-source research from PPRDPs will lead to “crowding-in” of public good research than what would otherwise have not taken place (5). PPRDPs can achieve economies of scale to drive increasing returns for all participants but in addition can capture a larger amount of agglomeration externalities if the partners are sufficiently in close proximity to one another.

To maintain public sector interests in terms of setting the research agenda while allowing for contractual research and development commitments between universities, NASA, and the private sector, a decentralized autonomous organization (DAO) framework (DAOs are a novel governance structure that exists on a blockchain protocol in which an organization can operate with no centralized authority) has the potential to align incentives and produce acceptable control rights for successful joint research projects. DAOs are able to maintain decentralization using “smart contracts,” [Smart contracts are software programs that execute automatically when preestablished “if–then” conditions are met. Use cases of smart contracts include escrow services (funds are held in escrow between two stranger parties until conditions of the transaction are met), prediction market (automatic distribution of funds after a certain outcome, such as an election or a stock price), and voting (automatic decisions after a vote is tallied)] or contracts that are programmed to be self-executing when predetermined conditions are met. A smart contract is analogous to a nation’s constitution, except it is extremely difficult for procedural drift to occur because of its immutable and self-executing nature (5) (Once the terms of the smart contract are programmed and deployed on the blockchain, it cannot be modified without the consensus of the DAO). Once smart contracts are established, there is no need to trust other members or a centralized third party for the DAO to operate, reducing counterparty risk and the dependency on trust among members (85) (Note that a network of firms in agglomerated regions that embrace resource and labor pooling as well as R&D collaboration can be unofficially considered a form of polycentric governance. However, the level of decentralization and collaboration can affect the magnitude in which positive agglomeration externalities are captured. Due to the trustless-based mechanisms of a DAO, specifically smart contracts, decentralization cannot be relinquished, mandating collaborative activity, potentially resulting in greater positive agglomeration externalities).

The institutional framework advanced by Rausser and Johnson is satisfied by a constitutional smart contract (86). When structuring the constitutional design, any prescription must essentially define: 1) the degree of decentralization; 2) the balance of power; 3) identifying interest groups; 4) the space of issues over which those interests can negotiate; 5) the degree of consensus that is sufficient to conclude negotiations; and 6) the appropriate course if negotiations break down (87) (Such constitutional smart contracts would be consistent with Ostrom’s Institutional Analysis and Development Framework in establishing position, choice, aggregation, and boundary rules). Smart contracts can provide the legal and regulatory infrastructure that allows for the strict reinforcement of the polycentric governance structure. In particular, the security of private property rights, enforcement of contracts, and assignment of liability for wrongful damage must be established (86). This allows DAO partnerships to have greater transparency and “prescriptive force.” The knowledge and acceptance of a rule lead individuals to recognize that if they break the rule, other individuals may hold them accountable (83).

DAOs, by design, admit that the collective interest of the PPRDP is able, for crucial matters, to rise above the immediate self-interest of any particular participants (86). This can be accomplished by allocating the majority control to public sector agents, who have internal incentives and mechanisms to emphasize fundamental knowledge advancements. The transparency and accurate logging of data using blockchain technology allow for these provisions to be fulfilled.

The PPRDP can be structured by a public research institution, partnered with NASA and other government agencies relevant to space research, to create a DAO on a public blockchain. The DAO’s main objective is to provide necessary resources and capital for several research clusters, which are organized research groups that vary by areas of study with the potential for public good research as well as commercial innovations in the space sector. Each research cluster would consist of human and intellectual capital from the public sector as well as potential for private sector personnel to engage in collaborative research. Companies who wish to participate will contribute what would be research funds to the DAO. In return, companies receive three types of tokens (An analogy for the three types of tokens is as follows: A soulbound token is akin to an identification card (i.e., passport, driver’s license) that cannot be forged or given to another person. A governance token is akin to a voting share that entitles a holder to vote on policymaking within a firm or organization. A nonfungible token is akin to a virtual deed or title that proves ownership of intellectual property). The first is a soulbound token (SBT), which is an irrevocable token that cannot be altered, sold, or transferred (88). Because of its unique attributes, SBTs can accurately represent and store an entity’s credentials, and history with the PPRDP, which reduces the occurrence of Sybil attacks [Sybil attacks are 51% coordinated attacks utilizing multiple pseudonymous identities to change transaction activity and thereby controlling the blockchain network and can incentivize active and meaningful participation (89)].

Second, as with NASA and research universities, private sector participants will receive governance tokens, with the amount equivalent to their investment (i.e., a $1 million investment would result in 1 million tokens). With governance tokens, members acquire voting privileges for two major decisions. First, members can vote on how the research funds will be allocated among the research clusters via a voting mechanism. Second, members can vote on the entry of other participants to a particular research cluster.

Each research cluster would then have the control right to determine whether the cluster will be open-source vs. codified intellectual property with exclusive licensing.

After a consensus has been achieved, research clusters will receive funds and will commence research operations. Members of the DAO will receive a nonfungible token (NFT), which states their share of the investment in that research cluster. Depending on demand, members of the research cluster can provide in-kind contributions (i.e., researchers, proprietary data, and lab facilities), which will be valued for additional influence or NFT share into the potential intellectual property that may result from major research discoveries. The NFTs will be used to distribute various forms of IP, whether it is a proportionate percentage of the patent’s income streams (e.g., royalties), right of first refusals, and exclusive or nonexclusive licensing rights.

The space economy is poised to transcend traditional boundaries as it ventures into uncharted frontiers rich with unprecedented technological and economic opportunities. To capitalize on the potential of space and its resources, it is crucial to foster open access to intellectual property, which serves as the lifeblood of innovation for further space exploration. By implementing such a strategy, the innovation cycle can be accelerated, unlocking the potential growth value of emerging sectors in space. PPRDPs play a crucial role in fostering this open innovation ecosystem by eliminating coordination failures between public and private stakeholders, facilitating agglomeration externalities of greater magnitude, and encouraging synergistic advancements in research by blurring the distinction between basic and applied research. By embedding the nonlinear decomposition paradigm of research within PPRDPs, such partnerships can further incentivize private firms to support open-access research, ultimately increasing returns to scale for both public good and commercial innovations.

We wish to acknowledge and thank all the scientists who provided advice and counsel during the preparation of our paper, specifically, Rebecca Abergel, Adam Arkin, Hamsa Balakrishnan, Aaron Berliner, Jean-Baptiste Bordes, François Dubrulle, Massimiliano Fratoni, Anouck Girard, Peter Hosemann, Kristi Morgansen, Marco Pavone, Dave Sedlak, Dan Stamper-Kurn, Dengfeng Sun, Sydney Sun, Abhi Tripathi, and Yoonjin Yoon. We appreciate the insightful and helpful comments of the editor and two reviewers.