Challenges to Innovation in the Government Space Sector

Abstract : Characteristics of the government space market, with its monopsony- oligopoly structure and complex robust products, make encouraging innovation challenging. The Department of Defense (DoD) acquisition structure represents one example of how these challenges are addressed in an institutional setting. However, a recent string of failures has brought into question the efficacy of the system. Multiple blue ribbon panels have been convened leading to recommendations about how the current system can be improved; however, these recommendations take certain implicit assumptions of the system as a given. If a major reform is to be achieved, these fundamental assumptions must be reviewed. This article takes a step back from the acquisition process, using innovation theory to assess the intrinsic challenges of encouraging complex product innovation in a government monopsony-oligopoly. In particular, it seeks to answer the following questions: (a) What are the implications of the space sector characteristics on innovation? (b) How (or to what extent) does the acquisition system address these implications? and (c) How can these insights be used to improve acquisition in the space sector?