Innovation Trends in the Space Industry

Victor Dos Santos Paulino

• Publisher: Wiley-ISTE
• Year: 2020
• Print ISBN: 9781786304919
• eBook ISBN: 9781119694816
• Edition: 1
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

Ever since their inception, space activities have been innovative, but not driven by commercial considerations – that is, until the end of the Cold War, when the commercialization of space escalated. As a result, the direction of the innovation changed in order to leverage new business opportunities, which reached a turning point in the 2010s.

This book discusses the developmental trends of the world space sector in detail, by analyzing their long-term evolution, and studying why this innovative industry sometimes experiences technological and organizational delays. Innovation Trends in the Space Industry also provides a framework to diagnose more accurately the potential technological threats that are currently faced by existing space tech manufacturers.

Moreover, this book, with an economic perspective, provides a close examination of the space sector. It also contributes to enriching innovation management theory by leading us to better understand industry emergence shaped by customers, to reinterpret technological and organizational inertia in high technology activities, and to refine disruptive innovation trends.

1
Theoretical and Empirical Framework

In this chapter, we introduce the theoretical and empirical framework used to study the innovation trajectories in the space industry.

In the first section, we present our approach to innovation management. As a relatively new activity and discipline, we first discuss its sources of legitimacy. We highlight its influence on the performance of firms and its ability to understand the central phenomenon of creative destruction (Dodgson et al. 2008; Tidd and Bessant 2009; Trott 2012).

In a second step, we present our typology of innovations, which is based on three dimensions: the type, level of novelty, and cumulative nature of innovation (Ehrnberg 1995; Nelson 1995; Utterback and Abernathy 1975). We then discuss innovation as a process. We detail the different “stage-gate” processes that structure the development of innovations (Dodgson et al. 2008).

Finally, we adopt a meso approach and present the lifecycle of the industry. This theory is one of the most important for understanding innovation (Dodgson et al. 2008). It allows a dynamic and simultaneous understanding of several essential dimensions of innovation, such as sales, innovation rate, and client entry. We review the main characteristics of each phase of the cycle.

In the section which follows, we introduce the space industry, which is the empirical framework for our study. We chose to study this industry because there is a lack of work in economics and management sciences applied to this industry. In addition, compared to other popular innovative industries, such as semiconductors and biotechnology, we believe that the space industry is a counterexample of an innovative industry (Dos Santos Paulino 2007; Dos Santos Paulino and Le Hir 2016). We then show that the space industry has blurred boundaries and is part of a larger whole, which is the space economy (Pérez et al. 2017). This economy includes downstream activities that use space technologies but are part of other industries (e.g. telecommunications, transportation).

In the following section, we detail the structure of the space industry: products, customers, producers, and market rules (Barbaroux and Dos Santos Paulino 2013; Dos Santos Paulino and Barbaroux 2016). In a nutshell, the space industry produces spacecraft (e.g. satellites, probes), launchers, and ground equipment that are purchased by institutional (military and civil) and commercial customers (e.g. US Department of Defense, NASA, Intelsat). The products of the industry are generally consumed in an uncertain space environment. Producers are generally large organizations (e.g. Boeing, Airbus DS) that are impacted by market rules that deviate from those observed in competitive situations (e.g. national preference, export control).

1.1. Innovation management: introductory elements

In this section, we introduce the definitions and theories in innovation management referred to in this book.

For firms, innovation is becoming an increasingly important part of their performance. As a discipline and field of research, innovation management legitimacy stems, in particular, from its ability to understand the phenomenon of creative destruction.

The term innovation is ambiguous because it can be defined from two quite different angles. The term innovation refers to a process that describes the phases necessary, for example, to design new products. The term innovation is also used to describe the outcome of this process as the new product itself (Tidd and Bessant 2009). We will discuss these two dimensions of innovation in the following sections.

We first characterize innovation as the result of a process through three dimensions: type (e.g. product, process), level of novelty, and cumulativeness (Ehrnberg 1995; Murmann and Frenken 2006; Nelson 1995; Utterback and Abernathy 1975). We then describe innovation as a process. We detail the two main strategies that structure this process (i.e. technology push and market pull). Then, we present the main evolutions and characteristics of the “stage-gate” processes implemented to develop innovations (Dodgson et al. 2008).

In the last part, we adopt a meso perspective by looking at the lifecycle of the industry. This theory is one of the most important to understand innovation and consists of several lifecycles. We will detail the product, innovation, and adoption lifecycle (Libai et al. 2008; Moore 2002; Rogers 2003; Utterback and Abernathy 1975).

1.1.1. Diversity and legitimacy of innovation

Innovation as a business activity, a taught discipline, and a field of research is a very vast field that relates to a variety of issues. Without being exhaustive, we can mention, for example, the innovation development processes implemented by organizations, the impact of innovations on existing systems, the adoption and diffusion of innovations, or the dynamics of innovations in the industry. In addition, innovation may involve different levels of analysis, such as the individual, industry, or economic system (Lenfle 2008; Schaeffer et al. 2016).

The broad spectrum of innovation will, therefore, lead to quite varied answers to the question “Why do firms innovate?”. Practitioners will give answers rooted in their professional activity, such as my boss wants our company to innovate and improve the company’s products. Students will often provide answers related to their interests and daily lives, such as improving the company’s image and dealing with technological changes. Scholars will be influenced by the theories they use and will provide explanations such as gaining strategic advantage and meeting customers’ needs. Despite the diversity of answers, there is usually a convergence toward the fact that innovation is increasingly contributing to firms’ performance.

Despite this close link between innovation and performance, it should not be forgotten that innovation is a very risky activity for firms. Several studies have shown that between 40% and 60% of new products have launched on the market fail (Chiesa and Frattini 2011; Cierpicki et al. 2000; Tidd and Bessant 2009).

In fact, innovation is a paradoxical activity because it is both a source of performance and failure. Schumpeter (1911) calls this paradox “creative destruction,” emphasizing that innovation simultaneously generates a phenomenon of destruction and creation. Creative destruction is observed at extremely varying levels, such as the firm, the products, the market, or even the industry. For example, in firms, creative destruction will make some skills obsolete and new ones emerge. When we look at the products of a particular firm, the phenomenon of cannibalization appears as another dimension of creative destruction. At a more global level, innovation will lead to the disappearance of existing markets and sectors and the emergence of new markets and sectors. In our opinion, the creative destruction phenomenon is one of the foundations of the legitimacy of innovation as a field of study for researchers and a teaching discipline for teachers. For example, Christensen’s (1997) work shows that it is the introduction of substitutes leading to creative destruction phenomena that legitimize the use of concepts specific to innovation, such as the innovator’s dilemma and cannibalization. Without creative destruction, more general notions of substitution and differentiation would often be sufficient to understand the introduction of innovations to the market.

1.1.2. Typology of innovations

Drawing on Dosi’s (1982) work, we define innovation as a change that involves novelty and is characterized by a direction and a pace. It is the direction of change that determines whether or not innovation is progress (Chouteau et al. 2017). In order to characterize innovation more precisely, the authors have proposed many typologies that are often based on Schumpeter’s (1911) seminal work. We consider it relevant to characterize innovations according to three dimensions: type, level of novelty, and cumulativeness.

1.1.2.1. Types of innovations

Based on the Oslo Manual (OECD and Eurostat 2005), we use the following types of innovations:

• – Product innovation: the market launch of a new good or service in terms of its characteristics (e.g. launch of a new car model).
• – Process innovation: implementation of a new production or logistics method for products and services (e.g. implementation of the “just-in-time” production management method). This type of innovation is often referred to as “organizational innovation” to emphasize that the change is more about task organization than equipment. In other chapters, we will often use this terminology.
• – Position innovation: implementation of a new marketing method involving significant changes in the form, distribution, promotion, or pricing of a product (e.g. selling Coca-Cola in supermarkets rather than pharmacies).

This typology makes it possible to characterize innovations, but it should be noted that...

Table of contents

• Cover
• Table of Contents
• Preface
• Introduction
• 1 Theoretical and Empirical Framework
• 2 The Emergence of Industry: The Influence of Demand
• 3 Slow Adoption of Innovations: A Key Success Factor
• 4 Technological Discontinuities and Strategic Diagnosis
• Conclusion
• References
• Index
• End User License Agreement