Analysis of government's role in commercialization of space technology

Establishment of joint government-industry programs is analyzed as a means of encouraging private investment in space technology and applications. The major barriers to investment in space resources and the government's role in reducing these barriers are explored, with emphasis upon investment requirements and risk. A recommended approach is presented for developing institutional arrangements for cooperation between government and private industry, based upon cost-benefit and effectiveness considerations. Controlled Privatization The technique of "controlled privatization" used by the United States government to augment the profit motive in selected industries is now being used to optimize America's applications of an emerging space technology. Thus, industrialization of space presents an excellent opportunity to examine and strengthen the free-enterprise system, as well as to provide new goods and services for society. Controlled privatization occurs when government and industry agree to create joint privatepublic (semi-private) goods. Examples of such goods are automobiles, railroads, and certain utilities. The domain of joint private-public goods is illustrated in the Privatization Model (Figure 1) by Curve BB: the set of commodities whose demand and investment factors dictate an "assisted free enterprise'' approach to development. The Privatization Model is a modified production function that shows the degree of private sector interest in creating commodities as a function of the dual inputs of the demand and investment feasibility (supply). The primary force in controlled privatization is direct government action. The National Aeronautics and Space Administration (NASA) has established Joint-Endeavor Agreements, Technology Transfer, and other programs in its efforts to involve private industry in space development. DEMAND 2618.1 Figure I . The Privatization Model describes private, public, and semi-public goods as functions of investment and market factors. These programs will be successful only if the government is effective in influencing the demand and investment conditions described in the Privatization Model. In a joint endeavor with McDonnell Douglas to develop and commercialize space-processing technology, NASA is encouraging privatization primarily by reducing the technological and economic barriers to Space Shuttle use. At its own expense, NASA has modified the Orbiter mid-deck crew compartment to accommodate McDonnell Douglas' early electrophoresis experiments. Over the next five years, NASA will also afford McDonnell Douglas considerable flight time on the Shuttle, in exchange for such nonmonetary considerations as data exchange and McDonnell Douglas' good-faith efforts to commercialize space technology (Ref. 1). Controlled privatization is usually achieved in this manner by reducing investment barriers since the government's ability to increase d e m a ~ d is limited. As a consequence, the transition of a 1 1 commodity from the public to the semi-private realm is usually represented by an upward shift in the Privatization Curve, as indicated in Figure 2. The key to controlled privatization thus is for the government to understand private-sector investment considerations and their impact upon technology development.