(With Jeremy Eckhause (RAND Corporation), Richard Terrile (NASA Jet Propulsion Laboratory), and Fernando Zapatero (Boston University)

The New Space Economy is growing rapidly as an important sector with implications for civil and defense applications. Many of the players are small businesses, known to be important in catalyzing economic growth; but these companies struggle to raise venture capital for the hardware and so-called “deep technologies” needed for space commerce. Thus governments around the world provide subsidies to these firms to support research and development.

In this talk we discuss the Small Business Innovation Program, the flagship initiative in the United States to support such firms in a two-stage selection process, as it is implemented at NASA. We characterize the technology development conducted within these firms and model the resulting portfolio. Notably, we distinguish between microfirms of 1-9 employees and larger firms of 10-499 employees. We show that that microfirms are less likely to be selected, but they advance technologies further than their counterparts. Our optimization studies indicate that the current program operates relatively close to the optimum; we also find that number of microfirms could be dramatically increased with only minimal effect on the resulting technology portfolio. The optimization analysis thus has important implications for national innovation policy.