Economic and Social Aspects of the Space Sector Development Based on the Modified Structure–Conduct–Performance Framework

Abstract

Background: The global space economy has grown remarkably, witnessing a 10-fold increase in active satellites during the last 15 years. This growth was accompanied by both the increase in geopolitical tensions feeding huge investments (the New Space Race), on the one hand, and the transformation, shifting from a domain historically dominated by government-led programs to one partially energized by commercial players and innovative business models (“New Space”), on the other hand. Objective: To assess the space economy’s current state and future prospects by considering its economic and social dimensions. Methods: Over 120 scholarly articles and “grey” literature positions (e.g., industry reports) were reviewed. The review was structured by a modified Structure–Conduct–Performance framework originally developed by industrial organization (IO) scholars. Findings: Outer space creates extremely harsh conditions for placing and operating objects in orbits, which results in high launching costs, steep reliability standards, capital intensity, and risks that are unmatched in most terrestrial industries. One of the main motivations to venture into this harsh domain was, and still is, the desire to dominate or the fear of being subjugated by others. This “original sin”, born of geopolitical rivalries, continues to cast a shadow over the space economy, channeling the majority of public space budgets into military-related programs. Moreover, many space technologies have a dual-use feature. Not surprisingly, governments are still the major source of demand, dominating midstream in the space value chain. This triad—harsh physics, great power rivalry, and a state-centric midstream—produces a specificity of the sector. In the recent two decades, new entrants (called “New Space”) have begun altering market structure, resulting in new conduct patterns focused on pursuits towards serial production, reusability, and lowering costs. Performance outcomes are mixed. While some efficiency gains are unprecedented, some doubts about market power and negative externalities arise. The assessment of the space economy’s performance is a challenge, as such, due to the blurred boundary between political objectives (supplying public goods, mitigating negative externalities) and economic optimization. Such trade-offs are becoming even more complicated considering the potential conflict between national and global perspectives. The paper offers a preliminary, descriptive study of the space economy through the lens of the modified S-C-P framework, laying basic foundations for the future, possibly more rigorous research of the increasingly important space economy.

1. Introduction

According to the OECD definition, “The Space Economy is the full range of activities and the use of resources that create and provide value and benefits to human beings in the course of exploring, understanding, managing and utilising space. Hence, it includes all public and private actors involved in developing, providing and using space-related products” [1] (p. 20). However, there are differing interpretations of which activities to include in the space economy, and therefore different estimations of its value. Roughly speaking, it could be estimated at between 300 and 400 billion dollars [2,3,4]. There were only 36 countries with GDP exceeding 400 billion dollars and 154 countries with GDP smaller than that number [5]. In the last few years, the space economy has drawn unprecedented levels of public, private, and media attention, reflecting both commercial potential and renewed geopolitical interest in exploring and exploiting outer space. In 2023, the number of active satellites (9115) was 10 times the analogous number before the first start of SpaceX’s rocket (namely 912 in 2007) [6]. The space economy is projected to grow substantially, with estimates ranging between USD 1 trillion and USD 3 trillion by 2040 [7]. However, some authors warn of a “space hype bubble” and tone down expectations [8]. Here, we follow the Lionnet’s classification of segments of space economy, namely upstream, midstream, and downstream [2] (Figure 1).

A confluence of factors is driving space economy growth. On one hand, the emergence of new business models—collectively called “New Space”—has lowered the cost of accessing orbit and shortened the development cycle for space hardware. High-profile ventures led by Elon Musk’s SpaceX, Jeff Bezos’s Blue Origin, and Richard Branson’s Virgin Galactic, along with hundreds of small and medium firms, exemplify the commercialization of launch services, satellite constellations, and the creation of suborbital tourism. On the other hand, the resumption of space rivalry among global superpowers has started large-scale, state-driven initiatives, sometimes termed the “New Space Race”.

Space exploration and exploitation were sparked during the Cold War. In this way, the first Space Race became a flywheel for crucial spillovers and externalities for the rest of the economy. Solutions for communicating find their way into wider markets. GPS—originally military—revolutionized navigation; miniaturized electronics developed for space use are penetrating consumer devices; composites are improving vehicles and structures; and solar panels, a technology developed to power satellites, have proliferated as one of the key sources of green energy. Recent geopolitical tensions have accelerated investments in the space economy. While these developments open new economic possibilities, they also pose pressing challenges such as congestion in orbits, space debris, as well as the risk of expanding conflicts into outer space.

Space is often seen as the domain of rocket scientists and engineers. Yet, following the well-known bon mot of Georges Clemenceau, French Prime Minister during World War I, “war is too serious a matter to leave to soldiers” [9], one could say that space is too vital to be left solely to those specialists. The far-reaching consequences of recent substantial developments in the space economy demand insights from social scientists, broadening the conversation to include economic and social aspects. After all, space is about the direction we choose as societies as we push beyond Earth’s horizon. As Boden aptly put it, “the Global Space Age was not the result of some inevitable force of technological progress, rational scientific quests, or satisfying innocent curiosity. Rather, it was the result of successive choices made by people in the chaotic universe of politics, navigating conflict, competition, and self-interest” [10] (p. 353).

To gain a general overview and assessment of any sector, industrial organization economists developed the Structure–Conduct–Performance (S-C-P) paradigm (cf. the bottom part (blue) of Figure 2).

S-C-P paradigm originates from Bain’s work [13]. Traditionally, structure refers to enduring industry traits such as “number and size distribution of (…) rival sellers and the manner in which their products are differentiated from one another” as well as “condition to entry” to the industry [13] (p. 2). The structure defined in such a way guides intra-sectoral Conduct, namely firms’ strategic behaviors and competitive interactions. These behaviors then influence Performance. The correlations between Structure and Performance measures are looked for in empirical research, while the Conduct part of the S-C-P model is typically omitted as a mediating factor. Bain’s work flourished in the development of plenty of IO follow-up research. Over time, IO scholars introduced refinements that acknowledge dynamic feedback loops and contingencies. For example, Scherer proposed feedback loops and “Basic Conditions”, namely supply and demand, as the extension of the model [11] (p. 5). This extension is adopted by Carlton and Perloff, who additionally extend the model by the “Government Policy” as an additional driver of firm structure, Conduct, and Performance, as well as basic conditions [12] (p. 4).

The economic literature about the space economy is still limited. It usually takes the form of “grey” literature, such as market reports published by consulting firms, etc., or focuses mainly on business, finance, and management aspects. There is a gap regarding a broader view of the space economy from a socio-economic point of view. The S-C-P paradigm could help fill this gap due to the broad definition of Performance, typically measured through efficiency and social welfare. This paper advances the lineage of the S-C-P approach in three ways that address a gap in space-economy research. First, it disaggregates Scherer’s basic conditions by mapping supply and demand separately across the space value chain—upstream (launch, manufacturing), midstream (operators), and downstream (user services). Second, it replaces the domestic “Government Policy” box with a broader rubric of geopolitical conditions, reflecting the sector’s global reach and its strategic, dual-use character shaped by great-power rivalry, export controls, and defense spending. Third, it introduces astrophysical conditions—gravity wells, orbital regimes, and radiation—as a foundational layer determining the sector’s operation, including launch costs, satellite lifetimes, and market entry barriers.

By integrating these astrophysical, geopolitical, and segmented market aspects as factors that impact every tier of the S-C-P model, the study offers a multidisciplinary framework that aligns industrial-organization theory with the unique realities of the space sector. This extension fills a conceptual gap and provides researchers and policymakers with a coherent tool to analyze current dynamics and anticipate future developments. This paper aims to assess both the current state and the future prospects of the space economy by considering its economic and social dimensions based on a modified framework of the Structure–Conduct–Performance (S-C-P) paradigm (see Figure 2). Concretely, it asks the following three guiding research questions:

• RQ1: How do the astrophysical environment, geopolitical conditions, and governments’ dominance in the midstream create the specificity of the space economy?
• RQ2: How does the structural change triggered by the rise in “New Space” shape intra-sectoral Conduct and, in turn, Performance?
• RQ3: In what ways does this sectoral specificity alter conventional notions of performance and welfare?

Answering these questions draws on scientific as well as “grey” literature, including secondary industry and policy data. Taken together, these questions guide an inquiry that unfolds as follows: the next sections detail the condition set that underpins structure, firms’ conduct, and performance implications in turn; the discussion then synthesizes findings and highlights avenues for future empirical work. In doing so, the paper lays foundational ground for a future, more rigorous, data-driven agenda on the economic and social impacts of humanity’s expanding presence in space.

2. Astrophysical Conditions

The universe has a diameter of approximately 93 billion light-years [14]. It contains around 2 trillion galaxies [15], while only our galaxy consists of about 300 billion stars [16]. However, the term space, as used in the title of this paper, will have a much more down-to-Earth meaning. When discussing the space economy, even in the most optimistic forecasts, it will certainly not extend beyond our planetary system in the coming decades (a diameter of about 9 billion kilometers or around 500 light minutes) [17]. In practice, however, the bulk of current human activity in space does not exceed the limit of geostationary orbit, i.e., 35,786 km from the equator (a diameter of 0.24 light seconds). From a geocentric perspective, it can be conventionally assumed that space begins 100 km above our planet’s surface. This altitude is the so-called Kármán line [15,18].

From the perspective of the whole, the dynamics of the solar system “is governed mainly by gravity” [17] (p. 19). In the second place, however less important, are electromagnetic forces [17]. These forces determine any activity in space; thus, let us look at both of them.

The pull of gravity could be visualized by the concept of a gravity well. Anything on Earth (or other celestial bodies) is considered to be at the bottom of such a well, and escaping it requires enough energy to achieve escape velocity. The vast majority of economic activity in space is based on satellites. The movement of a satellite can be imagined as its continuous descent toward the center of the Earth while moving parallel to its surface. As a result, the satellite’s trajectory curves. If the speed of this parallel motion is properly selected, this trajectory will be a closed curve, that is, an orbit. The satellite will orbit around the Earth, constantly falling towards it but never hitting its surface. A satellite having reached a given orbit needs no further propulsion. On the other hand, this principle also applies to space junk, which tends to accumulate over time. If the velocity is even higher, the object’s trajectory opens up and follows the hyperbolic shape [19].

From the economic activity point of view, the most important is the following classification of the Earth’s orbits:

• Low Earth Orbits (LEOs);
• Medium Earth Orbits (MEOs);
• Geostationary Orbit (GEO).

The delineations between the above categories are conventional (except for GEO) and thus fuzzy and vary depending on the literature source. The space starts at 100 km above the Earth’s surface (Kármán line), while the maximum value of the upper limit of LEO is 2000 km. However, most LEOs will be between 500 and 1000 km in practice. The problem with orbits below 500 km is their low longevity due to the effects of the residual atmosphere in the lower reaches of space, which has an inhibitory effect leading to deorbiting satellites or forcing the use of correction maneuvers (this is disadvantageous due to the propulsion needed, which is costly itself and increases the weight of the satellite and thus the cost of its launch). The problem with orbits higher than about 1000 km, on the other hand, is the inner van Allen belts with their radiative effects. LEOs are characterized by the highest satellite velocity and thus shortened period time (around one and a half hours) [10,20,21].

The altitude range of Medium Earth Orbits (MEOs) is from about 2000 km up to 35,786 km. They are characterized by lower satellite velocity and thus longer periods (from a few to nearly twenty-four hours). While the residual atmosphere ceases to be a problem in MEO, it is undoubtedly the radiation associated with the Van Allen belts. The inner belt extends from about 1000 to 12,000 km (the highest density is about 3000 km), while the outer belt extends from about 13,000 to as much as 60,000 km, while its highest density is at altitudes between 15,000 and 20,000 km. Therefore, the most commonly used range of MEOs is between the inner and outer Van Allen belts, i.e., between 8000 and 12,000 km. However, the GNSS (Global Navigation Satellite Systems) satellites are the exception [10,20,22].

Geosynchronous orbits have a period equal to the stellar day (therefore, they are characterized by the lowest satellite velocity). The key type of geosynchronous orbit is the Geostationary Orbit (GEO), which is an equatorial geosynchronous orbit located at an altitude of 35,786 km. Because it has an angular velocity equal to the velocity of the Earth, it gives the impression of a satellite being suspended over a single point above the Earth (above the equator, at a given longitude). This is a convenient property from the point of view of telecommunications. GEO offers very high coverage of the Earth, as it is visible from 43% of its surface [10,20,23,24].

Each of the aforementioned types of orbits offers a specific mix of properties that determine their varying suitability for a variety of applications in fields such as Earth observation, telecommunications, navigation, scientific research, and military applications. LEO satellites circle the Earth in roughly 90 to 105 min, making them well-suited for quick revisit times in Earth observation. Although the residual atmosphere creates drag and shortens orbital lifespans, the proximity to Earth means smaller, lighter equipment can be used, often enabling nano- and microsatellite designs. LEO’s accessibility—characterized by the broadest availability of launch providers and the lowest cost per kilogram of payload—fosters a dynamic market. Typical applications include intelligence and surveillance (e.g., Planet Labs – U.S., HawkEye 360 – U.S., ICEYE - Finland), large telecommunications constellations for low-latency internet access (Starlink – U.S., OneWeb - UK), and manned space stations (ISS, Tiangong). MEO satellites must contend with increased radiation exposure compared to LEO. However, these altitudes host key semi-synchronous orbits that fulfill global navigation needs; major GNSS constellations like American GPS or European Galileo reside here. Certain telecommunications networks, such as SES, also operate in MEO to balance global coverage with moderate signal latency. GEO satellites experience heightened exposure to solar wind, demanding robust spacecraft shielding. The principal advantage is vast coverage—one satellite can “see” more than a third of the Earth’s surface, which is ideal for telecommunications, especially satellite television and broadband internet (however, latency is becoming a problem regarding increasing expectations of internet users). Yet, the requirement for powerful transceivers and large onboard antennas increases satellite size and cost [10,19,25].

The source of the Sun’s energy is the thermonuclear reactions in our star, involving the fusion of the nuclei of lighter elements into the nuclei of heavier elements, namely the fusion of hydrogen nuclei into helium nuclei [26]. In addition to emitting electromagnetic waves in the full spectrum (including visible light), the Sun is the source of plasma emission in the form of the solar wind and the coronal mass ejections (CMEs) [27]. On the other hand, space is penetrated by cosmic rays from the galaxy. On the Earth’s surface, we are secured against this radiation by the magnetic field and the atmospheric layer. However, any payload launched into space has to deal with those challenges. The radiation effects of these particles can not only cause degradation of the surface of satellites or other spacecraft but also failure of electronic systems inside them.

The harsh physical conditions of space impose significant challenges that affect every aspect of space-based operations. To understand these challenges, it is reasonable to use a system approach to those operations. Accordingly, they could be divided into three broad subsystems: launch subsystem (getting assets into space and putting payload in the desired place), payload subsystem (spacecraft dedicated to operating in space, mainly satellites), and ground-station subsystem (communicating with space assets) [28]. Each of these subsystems faces constraints due to the realities of space physics, including gravity and orbital mechanics, as well as radiation.

Regarding the launch subsystem, to do anything in space, we must first overcome gravity forces, namely, escape from the Earth’s gravity well. This issue was theoretically depicted by Konstantin Tsiolkovsky in 1903 in his rocket equation. Putting it simply, it reveals a fundamental engineering as well as economic constraint: rockets must carry their own fuel to generate thrust. However, the more fuel added, the heavier the rocket becomes, which creates some kind of a vicious cycle. In order to untie this Gordian knot, we need to use multi-stage rockets, which drop the first stage (and sometimes the second stage) with empty tanks to reduce the weight mid-flight of the final stage with the payload. The economic consequences are huge.

In contrast to the on-Earth logistics, the payload fraction is extremely limited to only about 2–5% of the total vehicle mass. Although the fuel mass accounts for around 90% of the total rocket mass, it is not the crucial factor determining the huge launch cost [28,29,30,31]. The most important thing is that the stages of the rocket are typically used only once. One could imagine the cost of the terrestrial logistics if it were needed to throw away trucks, trains, or planes just after reaching a destination once. This is why the goal of reusability pursued by the New Space companies is such a game-changer.

Regarding the payload subsystem, satellites must contend with multiple environmental challenges once in space. Firstly, they have to stay firmly on an orbital track. Once reaching its target orbit, a satellite needs no further propulsion, while its speed depends on altitude. However, this refers to the ideal conditions of lacking drag. In LEOs, this condition is violated; the more, the lower the altitude of the particular orbit. Orbital decay caused by atmospheric drag in LEOs requires periodic propulsion to keep on track. Otherwise, one has to compromise on mission lifetime. Thus, there is an economic trade-off between the cost of securing the satellite with a propulsion system, and therefore its more complicated, expensive construction as well as higher costs of launching, versus shortening its operational life and therefore replacing satellites frequently, adding costs due to additional replenishments [25,28,29,32].

An additional challenge is created by radiation caused by the Van Allen belts, which trap high-energy particles (mainly in MEOs), as well as by solar activity and cosmic rays from the galaxy (mainly in GEO), posing risks to solar panels and electronics, as well as to astronauts in the manned missions. Therefore, satellites require radiation shielding, which increases weight and cost. Moreover, the electronics and computer components used on satellites must be radiation-hardened, increasing cost. This is true mainly for MEO and GEO satellites. Recently, one could observe a tendency to use commercial off-the-shelf (COTS) electronics and components in LEO satellites. This makes them more fragile as regards the possibility of radiation damage. Therefore, using radiation-hardened components versus off-the-shelf electronics is a matter of economic trade-off between more expensive satellites and more frequent launches of satellites [25,28,29,33,34].

Regarding the ground-station subsystem, once satellites are operational, they must communicate with Earth. The challenge is to transmit large amounts of data over long distances without degradation and with the shortest latency possible. The first issue is the radio signal’s attenuation (loss of power) due to the atmosphere. The second issue is the distance (an altitude is a key differentiating factor between orbits). From a communication point of view, the advantage of GEO is geostationarity (the satellite “hangs” over a point on Earth), which allows stable antennas. The disadvantage of GEO is the long distance, which creates huge signal power requirements, resulting in huge and very heavy satellites, which are expensive in themselves and expensive to launch. On the other hand, the advantage of LEOs is the proximity to Earth, which translates to substantially lower signal power requirements. Reduced demand for signal strength allows the use of smaller satellites. The second issue is latency. The radio signal to and from GEO needs 2 x 120 milliseconds to go, impacting real-time communication. On the other hand, the radio wave to and from LEOs takes only 2 × 2 milliseconds [25,28,29,35].

3. Geopolitical Conditions

3.1. The First Space Race

As early as 1903, the Russian teacher and amateur scientist Konstantin Tsiolkovsky formulated the rocket equation that would later lay the theoretical foundation for space exploration. Two decades later, Austro-Hungarian-born German physicist Hermann Oberth published “Die Rakete zu den Planetenräumen” (The Rocket into Planetary Space) in 1923, a work that was initially rejected as a doctoral dissertation at the University of Göttingen but finally became foundational for rocket science. Oberth became a mentor of Wernher von Braun, who would later play a crucial role in both Nazi and American rocketry. The first successful launch of a liquid-fueled rocket came in 1926, when American engineer Robert Goddard achieved a historic flight. However, lacking government support and financial backing, his work remained underfunded, limiting its impact [15,30].

According to Elvis [36], people face challenges for three reasons. At the core of their actions lie three universal motives: love, profit-seeking, and fear. A love of science was not enough to start space exploration; financing was needed. At that stage of development, plans were too bold to rely on business motivation. Thus, the road to space was paved by the military ambitions of two totalitarian regimes, Soviet (with Sergei Korolev as a leader of the space exploration program) and Nazi. In Nazi Germany, under the direction of Wernher von Braun, the Third Reich successfully launched the V-2 rocket in 1942—the first missile to cross the Kármán line. The V-2 was not designed for exploration but as a weapon of war [15,30]. Bleddyn Bowen notices, “the German V-2–was not only a missile strike vehicle that killed 3,000 people by the end of the Second World War but killed 20,000 through the use of genocidal labour practices” [10] (p. 7). It justifies his opinion of an “original sin” in space exploration. It refers to the idea that military and strategic concerns have been fundamental to space exploration from the very beginning.

The Space Race was one of the key aspects of the Cold War, a high-stakes competition between two superpowers fundamentally driven by a geopolitical struggle for superiority and dominance. In 1945, under Operation Paperclip, the U.S. brought Wernher von Braun and over 1600 German rocket scientists. Similarly, the Soviet Union, through Operation Osoaviakhim, brought over 2200 specialists under the direction of Sergei Korolev, later known as the “Great Constructor”. These efforts laid the foundation for both nations’ space programs [10,15,30].

Initially, the Soviet Union took an early lead due to the launch of Sputnik 1 in October 1957. The leadership of the Soviets in the Space Race was further proven by Yuri Gagarin’s historic orbital flight aboard Vostok 1 in April 1961. Determined to reclaim the lead, the U.S. initiated the Apollo program pursuing President John F. Kennedy’s goal: landing a man on the Moon before the decade’s end [10,15,30,37,38].

The turning point of the Space Race came in July 1969, when Apollo 11 successfully landed on the Moon. The Soviet lunar program, in contrast, suffered setbacks. This was not the end of the Space Race yet; however, it was a pivotal moment prophesying American victory [10,15,30].

3.2. The New Race

The collapse of the USSR was the final chord of the space race, the arms race, as well as the Cold War in general and paved the way for U.S. world domination in the following decades, which are referred to as Pax Americana. In this period, one could observe the relaxation of geopolitical tensions after decades of the Cold War [37]. For space exploration, this pause meant the advent of global cooperation. The most appealing symbol of the phase of cooperation was the International Space Station (ISS), which was launched in 1998. However, with rising geopolitical tensions, cooperation has weakened. Russia has announced plans to exit the ISS by 2028, while NASA is planning to deorbit the ISS around 2030 [39,40].

A new rival in space exploration has emerged against the U.S., China, which has been developing its space sector for years and in 2022 launched its national space station, Tiangong. China’s space capabilities have long since overtaken those of Russia’s faltering space program (see Figure 3). An apparent sign of weakness of Roscosmos was the crashing of Luna-25 in 2023, the first Russian lunar lander since 1976 [10,20,41].

In 1970, China launched its first satellite, becoming the fifth nation to reach orbit. In 2003, Yang Liwei’s space flight made China the third country with an independent manned space mission in its track record. In the last two decades, China has significantly outpaced Russia and is now competing directly with the U.S. Driven by geopolitical ambitions and national prestige, China has significantly expanded its space capabilities, backed by substantial state funding and a long-term strategic vision. The Chang’e program has led to multiple successful lunar landings, including the first-ever landing on the Moon’s far (dark) side (2019), which returned lunar samples (2020). Meanwhile, Tianwen-1 successfully placed a rover on Mars in 2021. A critical milestone was the completion of the Tiangong space station in 2022, making China the only country with its own national orbital station at the moment [10,20,41].

Both the U.S. and China seem to focus the efforts on the Moon. On the one hand, the Moon could be treated as a gateway to further deep space exploration and a source of valuable resources. The gravity well of the Moon is much easier to escape than the Earth’s. Moreover, the resources of water ice and helium-3 could be used for rocket fuel and nuclear fusion. On the other hand, the Moon could be seen as a choke pointfrom the military applications and dominance in space perspective. NASA’s Artemis program, launched in 2017, aimed to return humans to the Moon by 2026 (this date is already delayed) and establish a sustainable lunar presence. The Artemis Accords, signed by 53 nations under the U.S. umbrella, aim to create an international framework for lunar resource utilization and governance. China, in partnership with Russia, is countering this with the International Lunar Research Station (ILRS), aiming for a 2030s Moon base. To the initiative, 11 other countries joined [41,42,43].

The U.S. has restructured its space policy by establishing the United States Space Force (USSF) in 2019, making it the sixth branch of the U.S. military [44]. “China’s military, the People’s Liberation Army (PLA), oversees both military and civilian space activities” [45]. The PLA “is shifting from a force focused on nuclear deterrence to one more capable of achieving a variety of coercive effects in, from, and to space” [46] (p. 2). From this point of view, space is emerging as a new domain of geopolitical competition.

According to [47], worldwide government spending on space programs reached an all-time high of about 135 billion dollars in 2024. The United States led in space-related expenditures, allocating approximately 79.7 billion dollars, while China ranked second, investing nearly 20 billion dollars in space initiatives. In 2013, global public spending for space activities was estimated at 53.6 billion dollars. Russia accounted for 9.75 billion in that pie, while China accounted for only 3.7 billion [48]. However, eleven years later, those numbers were 3.96 and 19.89 billion dollars, respectively [47], showing who took second in the New Space Race.

Figure 3. Governmental spending on space programs: (a) global view (2024) and (b) the two leading countries (2021–2024). * Budgets indicated for European countries include their contributions to ESA and Eumetsat. Source: own based on [47].

Figure 3. Governmental spending on space programs: (a) global view (2024) and (b) the two leading countries (2021–2024). * Budgets indicated for European countries include their contributions to ESA and Eumetsat. Source: own based on [47].

While growing at a 9.4% CAGR, China’s spending between 2013 and 2018 was already impressive; the 27.8% CAGR between 2018 and 2024 was just dramatic. As a result, even though China’s spending is about four times less than the U.S., one could notice that the dynamics of China’s spending hugely outperform that of the U.S.; the CAGR between 2021 and 2024 accounts for 24.6% and 13.4%, respectively (cf. Figure 3). In the early 2000s, the U.S. had a 75% share of global public space spending, dropping to 58% in 2018 [48]. However, since that time, the U.S. has stabilized this share. In 2024, it accounted for 59% [47]. Keeping pace with the global growth in recent years could be attributed to the huge budget of the relatively newly established (in 2019) United States Space Force [44].

The data shows that the New Space Race is rapidly unfolding and is being driven mainly by the pursuit of geopolitical dominance, with defense/military spending starting to outperform civil spending (while much of the civil spending could be attributed to the dual-use technologies). According to [48], in 2018, military spending accounted for 37% of total governmental spending on space. However, the ESA report [3] shows that the military spending share has been systematically growing since that time, and it slightly outperformed civil spending, reaching 50.2% of total global governmental spending in 2023. China’s space ambitions could be seen both as a response to the U.S. and as a driver of the New Space Race. Consider the preamble to “China’s Space Program: A 2021 Perspective” (2022), which cited in the first sentence President Xi Jinping, “To explore the vast cosmos, develop the space industry, and build China into a space power is our eternal dream” [49].

The discussion above aligns with the view of “original sin” of space politics, namely that military concerns have been fundamental to space exploration from the very beginning. National security interests and geopolitical rivalry have instead driven its exploration and utilization. For example, the development of launch capabilities was linked to ballistic missile programs, while satellites have played a crucial role in intelligence, surveillance, and communications for military operations [10].

Therefore, space cannot be separated from power concerns and geopolitical competition. The U.S. and China are both developing space-based surveillance, missile defense, and potential offensive capabilities. They both know that space dominance will determine strategic leverage, making space an extension of geopolitical rivalry. According to Kopeć [20], four approaches to space politics could be differentiated: cooperation, passive weaponization, acknowledgment of the inevitability of weaponization, and active weaponization. For example, in the post-Cold War period, the geopolitical rivalry was temporarily supplanted by cooperation, with the International Space Station as an emblematic result. This approach did not sustain, however. What we witness now is passive weaponization with space capabilities oriented primarily on supporting on-Earth warfare. However, the rhetoric and narration seem to evolve into more aggressive approaches.

One could remember warnings of “space Pearl Harbor” [50] or the seminal book “Astropolitik” by E.C. Dolman [37]. The last one argues that the control of space equates to control over Earth’s strategic future. On the other side of the ocean, Guoyu Wang, Deputy Director of the China National Space Administration (CNSA) Space Law Center, warns, “exploitation of the resources on the Moon and other celestial bodies could become the spotlight of a new round of the space race and a new ’battlefield’ among space powers” [51]. Ye Peijian, the head of the Chinese lunar exploration program, remarked that “the universe is an ocean, the Moon is the Diaoyu Islands, and Mars is Huangyan Island. If we don’t go there now, even though we’re capable of doing so, then we will be blamed by our descendants. If others go there, then they will take over, and you won’t be able to go even if you want to. This is reason enough” [52].

Considering the above discussion, it seems to be a justified opinion that the near future of space exploration and exploitation will be based on the more aggressive approaches to space politics, namely, acknowledgement of the inevitability of weaponization or even active weaponization (cf. [20]). On the one hand, the result will be an increasing stream of public spending and acceleration of technological progress. On the other hand, it will cause an increasing threat of war both on Earth and in space.

4. Supply and Demand

4.1. Upstream, Midstream and Downstream

The space economy encompasses all activities and resource uses that generate value and benefits for humanity through the exploration, study, management, and utilization of space [1]. Although this definition is widely used, there are differing interpretations of which activities to include in the space economy [53]. Of the many options available in the literature, the most convincing is the approach offered by Lionnet [2]. He proposed to look at the space economy through the lens of the basic economic category, namely supply and demand. Thus, the space economy can be divided into three key segments: supply (the space infrastructure industry), demand (namely buyers and operators of space infrastructure), and induced markets (products and services induced by space infrastructure). From the value chain perspective, these segments could also be named as upstream, midstream, and downstream, respectively (c.f. Figure 1).

The upstream segment (supply) focuses on the design, construction, and sale of space systems that play the role of space infrastructure. In the same fashion as the on-Earth equivalents (e.g., transport or telecommunications), it requires substantial investment, has long production cycles, and is costly to maintain and operate. The upstream segment value could be estimated at 88 billion dollars. It comprises the following:

• Launch systems (~ USD 12 billion): rockets used to deploy spacecraft into orbit;
• Spacecraft systems (~ USD 64 billion): mainly satellites, transport modules, etc.;
• Ground systems (~ USD 12 billion): including production support systems, ground launch support systems, and ground support systems for spacecraft [2] (pp. 2–3, 7).

The space infrastructure, driven by demand for space systems (midstream estimated at USD 125 billion), is fueled by the following:

• Political requirements for space services (~ USD 110 billion): the acquisition and utilization of space systems (infrastructure) to fulfill the needs of public space programs, including military, scientific, and other civil applications;
• Commercial demand for space systems (~ USD 15 billion): increasing number of private companies, which exploit space assets [2] (pp. 3–4, 7).

The third and last segment of the space economy is the downstream, which encompasses areas of economic activity that directly result from space-based services provided by midstream operators. These areas could be called space-enabled products and services or induced markets, including the following:

• User terminals (~ USD 83 billion): hardware enabling consumers and industries to access satellite services (e.g., GNSS chipsets for phones and cars, satellite antennas).
• Value-added services (~ USD 84 billion): data processing, analytics, and enhancement of raw satellite data for various applications [2] (pp. 4–7).

Thus, according to Lionnet’s estimations, the total space economy has a consolidated value of USD 292 billion (USD 125 billion + USD 83 billion + USD 84 billion). The value of the upstream (USD 88 billion) is already included in the value of the midstream. Therefore, it should not be counted twice [2] (p. 7).

4.2. Aplications

An alternative split-out of the space economy can be based on the main applications, such as telecommunications, navigation and precision timing, remote sensing/Earth Observation (EO), and others (scientific exploration, human space activities, etc.). Figure 4 depicts the structure of satellites across these applications. Let us take a closer look at the first three, which have the strongest commercial meaning.

Telecommunication refers to the transmitting or exchanging of information through various means, including satellite communication. Satellite communication is generally used for the same applications as its terrestrial counterparts, mainly TV, radio, and the internet. The main advantage of satellite communication over them is that the “signals can reach virtually any place on the Earth’s surface. This is simply not always possible with alternative options such as radio towers and cables, or it may at least be economically unviable” [55] (p. 92). It all began with the launch of SCORE in 1958, the first telecommunications satellite. In 1962, Telstar became the first commercial telecommunications satellite, and in 1965, the first geostationary telecommunications satellite, Intelsat, was deployed. Historically, the development model focused on designing and deploying increasingly powerful satellites in GEO to maximize coverage. Over time, GEO satellites evolved in power, frequency use, and performance. These advancements made satellites exponentially more capable, supporting thousands of channels and complex data networks. However, these gains came at a high cost, including expensive Earth stations, large satellite masses, and high launch expenditures. The focus remained on GEO, which simplified ground operations by allowing fixed-position antennas [25,56].

By the 1990s, the limitations of GEO systems—particularly latency and signal path loss due to distance—led to the development of the first LEO constellations, which offered drastically reduced latency and greater signal strength due to proximity to Earth. Early LEO pioneers included Iridium, Globalstar, Orbcomm, and ICO, offering mobile voice and data services. However, most faced bankruptcy due to the combination of high capital costs, expensive and bulky user terminals, and rapid advancements in terrestrial cellular networks that made satellite phones obsolete [25].

These failures raised skepticism about large-scale satellite constellations for years. However, at the end of the 2010s decade, the LEO mega-constellations (Starlink, OneWeb) started to emerge, using mass-produced small satellites, which could be launched in volume at lower costs (SpaceX cost-cutting in launching services), delivering internet and networking services with minimal latency. On the other hand, High Throughput Satellites (HTS), such as Viasat-1/2, Intelsat Epic, and Hughes Jupiter, dedicated to GEO, were developed recently.They feature throughput fifty times greater than earlier models, enabled by improved digital encoding and spectrum reuse. These HTS continued the traditional design trajectory but vastly increased performance and cost-efficiency. In the meantime, the emergence of MEO satellites aimed to balance the advantages of GEO and LEO satellites. Medium Earth Orbit satellites offer lower latency than GEO and broader coverage than LEO. For example, between 2013 and 2019, the SES O3b constellation was launched as part of this effort [25,55,56].

The development of the American GPS started in 1973 and resulted in the era of satellite navigation (GNSS). Russian GLONASS, Chinese BeiDou, and the European Galileo, like GPS, all operate at MEO. These networks rely on precise atomic clocks in satellites to broadcast timing signals, allowing receivers on the ground to calculate location with near-centimeter accuracy [25]. In the beginning, the satellite navigation system was developed for military purposes. The Gulf War of 1990–1991, often referred to as the “first space war”, demonstrated the strategic advantage reached due to using GPS [20,37,57,58]. The tragic downing of a South Korean aircraft over the USSR in 1983, caused by a pilot’s navigational error, led to the decision to make GPS available for civilian use [59]. In 2000, President Clinton authorized a policy directive ensuring that civilian users would have access to the same location accuracy once reserved for the U.S. military. This change significantly improved navigation accuracy, leading to the impressive growth in GPS adoption accompanied by the smartphones’ spread [60]. Over half of all usage lies in phone-based location services; GNSS data also underpins aviation, maritime navigation, autonomous vehicles, environmental monitoring, precision agriculture and the precise timing required by banking and internet networks [25,60].

Remote sensing, or Earth observation (EO), is a technique for identifying objects and their properties by analyzing data obtained remotely. It can be carried out using various platforms: balloons, aircraft, or satellites. A major milestone was achieved in 1946 with the first photograph taken from space when a V-2 rocket recorded an image. The Cold War further accelerated the development of reconnaissance satellites. The 1960s saw the expansion of remote sensing technologies into radar imaging, opening new possibilities for Earth monitoring, particularly under cloud cover or at night when optical photography was ineffective. Since then, EO has evolved rapidly, covering an ever-growing range of applications, from monitoring ecosystem changes to supporting crisis management and disaster response [25,60,61].

5. Structure

In the S-C-P framework, the structure is understood as the relatively stable, firm aspects of the sector that rule the sector players’ conduct (strategies) and, therefore, sector performance. On the other hand, the structure is conditioned by astrophysical and geopolitical conditions as well as by supply and demand; cf. the modified S-C-P model (Figure 2). The S-C-P model originates from the applied microeconomics strand called Industrial Organization (IO). Thus, the structure originally relates to the level of competition within an industry, considering factors such as concentration, product differentiation, and barriers to entry [11,12]. However, the implicit assumption is that some kind of market already exists. That was not, and to some extent still is not, the case in the space economy.

According to the Cambridge Dictionary, structure denotes “the way in which the parts of the system or object are arranged or organized” [62]. The basic elements of the space economy are governments, businesses, and citizens/customers. These parts could be connected by the government-led and centrally controlled activities focused on pursuing public priorities or by market forces. “Space is a place: one in which, (…) both the government and market forces will play essential complementary roles” [38] (p. 1). Their roles and engagement evolved over time. This is an economic problem in establishing the abovementioned structure and the ideal proportions between the government and the market. Weinzierl and Rosseau expressed it in the claim they call the “First Fundamental Theorem of Welfare Economics”, namely, “under certain conditions, using the decentralized market to organize activity makes the most of the resources we have. (…) Those conditions include: the absence of externalities, the ability to trade all goods and services, and all participants being rational, informed price-takers” [38] (p. 4). Following this idea, our analytical framework’s structure is understood more broadly than typically in the S-C-P model. Only the last condition above refers directly to the main question of the orthodox interpretation of the structure, namely if there is market power (allowing it to be a price-maker) in the sector, thus defining the structure as perfect competition or imperfect competition (monopolistic competition, oligopoly/monopoly, oligopsony/monopsony, bilateral monopoly, etc.).

Historically, the space economy has been predominantly driven by government initiatives. During the mid-20th century, national space agencies spearheaded space exploration, focusing mainly on national security and, to some extent, on scientific research. Publicly funded civil space agencies were tasked with overseeing space infrastructure development to support national and international programs. Initially, they focused on directly procuring, managing, and operating space systems. Then, some of them, like NASA, started to focus primarily on policy and program coordination while outsourcing operational responsibilities to specialized third parties. These agencies typically finance the full lifecycle of space system development through large-scale research, development, and technology initiatives. Similarly, military space agencies are responsible for developing and operating defense-related space assets. While their function mirrors that of civil space agencies, their primary focus is national security and defense applications. In such a way, governments created (and still create in a large proportion) the midstream demand for space infrastructure secured by upstream activities, namely the space manufacturing segment, comprising launch subsystem, spacecraft subsystem, and ground subsystem [2,38].

The earliest satellites (1950s) were purely government-funded and non-commercial, serving military needs. It was Telstar 1 (1962)—a joint venture between NASA and AT&T—that introduced the first commercial transatlantic satellite TV broadcast. In 1964, Intelsat (International Telecommunications Satellite Organization) was created as an intergovernmental organization to provide and control global satellite telecom services for Western countries. Geostationary communications satellites became popular since the launch of Intelsat I (Early Bird) in 1965, enabling continuous transatlantic telephone and TV broadcasts. As a response to Intelsat, the Intersputnik (Intersputnik International Organization of Space Communications) was founded in 1971 by the USSR and eight other socialist countries. NASA, ESA, and the Soviets controlled satellite design, launch, and operation, with private firms only acting as B2G contractors. On the other hand, satellite communication operations were run by government-backed consortia like Intelsat or Intersputnik. For example, Intelsat sold telecom bandwidth via state-run satellite operators to telecom providers and broadcasters (B2B), starting the era of commercial use of space [63,64,65].

On the other hand, the GNSS signal and Earth observation data generated due to the government’s investment in the space infrastructure are still, to a large extent, offered freely as public goods. While state-owned monopolies still controlled satellite communication, the U.S. and Western Europe began allowing private players to enter the market. The first private-sector SatCom services appeared in the late 1970s, when the U.S. deregulated domestic satellite services, allowing the leasing of satellite capacity to private businesses [66]. In 1985, SES (Société Européenne des Satellites, Luxembourg) was founded as a privately owned satellite operator, breaking the European monopoly model. The 1980s-1990s saw a massive shift from government-run satellite communication to private commercial services, with direct-to-home TV, corporate data networks, and broadband services becoming profitable markets [67]. The most significant structural change came with the privatization of Intelsat (2001), transforming it from an intergovernmental organization into a private, shareholder-owned company [68,69]. National orbital communications operators were privatized or restructured and started to operate as independent commercial firms. Nowadays, the satellite communication segment still represents a huge portion of the commercial space economy pie.

However, the revolutionary change, called New Space, emerged in a different space economy segment. The crucial shift in the space industry, fundamentally transforming the role of private companies as drivers of change, occurred in space transportation—an area traditionally dominated by government agencies and their contractors, usually from the defense industry. This transformation began against the backdrop of a stagnating U.S. government space program at the turn of the 21st century.

One of the key catalysts for the change was the XPrize (then renamed the Ansari XPrize), launched by Peter Diamandis in 1996. This USD 10 million competition challenged private teams to build a reusable spacecraft capable of twice carrying passengers to suborbital space within two weeks. In 2004, SpaceShipOne, developed by Burt Rutan’s Scaled Composites with support from funding (USD 20 million) received from Microsoft co-founder Paul Allen in 2003, won the XPrize. This achievement demonstrated that small, well-funded private teams could relatively quickly and cheaply accomplish what was previously thought to be the domain of big companies supported by national space agencies. The XPrize ignited interest in commercial human spaceflight. Inspired by this success, the billionaire Richard Branson founded Virgin Galactic in 2004 to develop SpaceShipTwo (based on SpaceShipOne), aimed at commercial suborbital tourism. Virgin Galactic’s maiden spaceflight occurred in 2018 [70,71,72,73].

Since then, Virgin Galactic has conducted just about a dozen or so suborbital flights carrying about 60 passengers (including the founder of the firm) and crew. Branson also started Virgin Orbit (U.S.) as a spin-off of Virgin Galactic (U.S.), focusing on small satellite launches using LauncherOne as a launch vevicle. LauncherOne was designed to deliver 300 kg of payload to LEO. It conducted six launches between 2020 and 2023, achieving four successful missions while experiencing two failures. Following a second unsuccessful attempt and facing financial difficulties, Virgin Orbit went bankrupt in 2023 [73,74].

In the meantime, Jeff Bezos, the founder of Amazon, founded the space technology company Blue Origin in 2000. Initially operating quietly with Bezos’s private funding, Blue Origin gained recognition in April 2015 with New Shepard’s first successful uncrewed launch and landing. In 2021, Bezos himself flew aboard the rocket on its first crewed flight past the Kármán line. New Shepard is a fully reusable, suborbital rocket designed mainly for space tourism. It carries up to six passengers or cargo beyond the Kármán line, offering a few minutes of weightlessness before returning to Earth and the possibility to conduct experiments due to the cargo option. The vehicle comprises a crew capsule and a booster that lands vertically after launch. The capsule descends with parachutes and a rocket engine. New Shepard has flown 30 times, with 10 crewed missions earning more than $100 million from space tourism [70,71,75,76]. The next major success was reached in 2023 when Blue Origin supplied its first BE-4 rocket engine to United Launch Alliance for the Vulcan Centaur rocket. On 16 January 2025, the company successfully achieved orbit with the inaugural launch of its New Glenn heavy-lift rocket (45 tons to LEO) [77].

While the space tourism offered by Virgin Galactic and Blue Origin still remains hardly a curiosity or a very small niche of the space economy at best (one could find that USD 100 mln from space tourism from 10 crewed missions is a small amount compared to the USD 300–400 bln space economy), the reusability possibility proved, firstly, by New Shepard was a true milestone. However, this functionality in the case of orbital rockets was fully leveraged by Blue Origin’s competitor, SpaceX (New Glenn conducted only one flight up to now, and its first stage, designed as reusable, was lost on descent). Until now, Elon Musk’s SpaceX is the only company in the New Space segment that truly revolutionized the launch industry. As a result, it also revolutionized the whole space economy by widely opening the doors to orbit due to its focus on reducing launch costs. Despite the three failed launch attempts, the Falcon 1 rocket finally reached orbit successfully in 2008, making SpaceX the first privately funded company to achieve this feat. This success broke the monopoly of state-backed launchers. It proved that private companies could develop and operate orbital launch systems from scratch, paving the way for cost reduction, reusability, and democratizing access to space [78,79,80].

The cost of launching payloads was one of the primary barriers to space economy expansion. The model of expendable rockets, where each launch required a new vehicle to be built from scratch, made spaceflight prohibitively costly. The Space Shuttle program challenged this model. After winning the Moon race, “NASA was tasked with making space access routine and affordable” and planned to achieve it thanks to “a reusable space plane that would launch into low orbit with the help of single-use rocket boosters and then reenter Earth ’s atmosphere and land on a runway” [38] (pp. 21–22). The reusability was seen as the key to keeping costs down. In practice, however, their performance was far from this assumption. The cost of launching cargo was USD 90,000 (in today’s real value) per kilogram. From the first to the last start, the shuttle program cost accounted for $290 billion (in real today value), consuming nearly a third of the whole NASA budget over that span, namely 1981–2011 [38] (pp. 23–24).

The idea of reusability is founded on transforming rocket launches into something like airplane flights. However, the prerequisite is the high cadence of the rocket’s flights. Sixty missions per year were expected for space shuttles. Despite efforts to secure the monopoly for shuttles to handle all defense payloads, the cadence of launches remained very low [38]. The Space Shuttle program conducted 135 flights over the whole thirty-year span, including two failures with 14 astronauts lost (Challenger in 1986 and Columbia in 2003) [81,82]. This equals four and a half flights per year on average.

The Aldridge Commission (under the G.W. Bush administration) recommended a transformation of NASA, including seeking to purchase services from private companies that truly compete with each other, and limiting its own role to those areas in which it could perform irrefutably well. In 2005, NASA started a USD 500 million program to resupply the International Space Station called COTS (Commercial Orbital Transportation System). Throughout its history, NASA has contracted with private companies to produce and service equipment based on cost-plus contracts. It means that the agency covered all proven costs, as well as assured markup. Of course, such a system did not create incentives to save money through cost discipline, efficiency, and innovation. However, it was intended to insulate contractors from the risk tied to the ambitious, extraordinary upfront investments. Contrarily, COTS contracts were based on a fixed-price model (also known as value-based pricing); namely, the agency requests a service for a set fee, putting the risk on the private firms. They receive, however, the possibility to create extraordinary profits if they are able to keep costs far below that fee. In this way, the agency has sown the seeds of revolution [38,83].

One of the first firms that awarded the first fixed-price COTS contract in 2006 was SpaceX. Money from NASA came at a crucial moment, supporting the company in the toughest time (between 2006 and 2008, three attempts to launch its small-lift vehicle Falcon 1 failed), allowing it to survive to the fourth, this time successful, flight. The fifth (2009) and last one was the only commercial one. It cost about USD 7 million, which accounted for around 14,000 per kg. In the next year, SpaceX introduced its medium-lift Falcon 9, which revolutionized the launch industry [38,70,71,78,79,80,84].

The COTS program was a success. At half the cost of the single shuttle flight, NASA supported the development of two new orbital rockets (Falcon 1 and 9) as well as a cargo vehicle, namely the Dragon capsule, which first docked with the ISS in 2012, thus fulfilling the SpaceX COTS contract. Satisfied with the results, NASA launched a larger follow-up program called Commercial Resupply Services (CRS) focused on routine cargo delivery to the ISS, thus continuing to support the private sector, including $1.6 billion for SpaceX. The next NASA program, Commercial Crew (CC), extended this new cargo model to astronauts. This new NASA approach (fixed prices) was an inflection point because the agency could be considered one customer among many for the first time in such a way, introducing more market-driven activities in the upstream and midstream dominated by a government-driven approach. Therefore, in line with the First Fundamental Theorem of Welfare Economics, the market proved to be an efficient way of organizing resource allocation [38].

Indeed, the money from NASA supported the further development of Falcon 9. The milestone was reached in 2015, when, just a few weeks after New Shepard’s achievement, Falcon became the second private partially reusable rocket. The Falcon 9 achievement was much more important. While New Shepard is a suborbital rocket, spending a few minutes with tourists in microgravity, Falcon 9 was the first orbital-class rocket to successfully land after launching. To be clear, the landing part of the rocket is the first stage (booster). However, it is the most expensive part. SpaceX re-flew a previously used booster the following year, proving that reusability could work in practice. This innovation slashed launch costs substantially. The cost of launching Falcon 9 is USD 2600 per kilogram of payload, which is less than 5% of the space shuttle cost [38,70,71,78,79,80,85].

Falcon 9 became the workhorse of contemporary spaceflights, accounting for around half of them (Figure 5). Thanks to its first-stage reusability, SpaceX undercut traditional launch providers like American ULA (United Launch Alliance) and European Arianespace, which had long dictated prices for the Western countries’ customers. Those customers face entry barriers if they would like to buy launch services from the rapidly developing launching sector in China.

Consider American regulations like the International Traffic in Arms Regulations (ITAR) established during the Cold War, which made space trade not available to “U.S. enemies and their fellow travelers” [87] (p. 9). Since the late Reagan administration, the possibility of using Chinese or Soviet launch vehicles became allowed, and since Clinton, licensing under ITAR was moved to the U.S. Department of Commerce. However, in the mid-1990s, China experienced a few failures in launches, some of which involved US-built satellites being destroyed, with the most notable accident being that of a Chinese rocket carrying an American Intelsat 708 payload that failed. After the subsequent Cox Commission report was completed in 1998, licensing under ITAR went back to the Department of State, with the primary role of the Department of Defense. As a result, space trade with China was quashed [87,88]. For a few years, the situation was leveraged by European Thales Alenia Space. Between 2005 and 2012, this company used Chinese rockets to launch so-called ITAR-free satellites successfully. However, this collaboration ended in 2013 when a U.S. company was fined for selling ITAR-controlled components, prompting Thales Alenia to discontinue its ITAR-free satellite line [87,89,90].

Satellite operators from Western countries looking for bargain offers could still deal with Russians (e.g., Soyuz and Proton rockets). However, the sanctions imposed by the U.S. and EU on Russia in 2014, following its annexation of Crimea, have indeed narrowed the path to Russia’s orbital launch market, and after Russia’s full-scale invasion of Ukraine in 2022, they closed it definitively. Therefore, ITAR and sanctions lead to a bifurcated market, prioritizing geopolitical control over open competition (according to Gurtuna, the opportunity cost of ITAR restrictions for the U.S. space companies was around USD 2.35 billion for the period of 2003–2006 [88] (p. 22)). This situation solidifies U.S. dominance in the space sector by segmenting the global market, thus resulting in the reliance of Western countries on U.S. or allied (France, Japan) launch providers to avoid legal risks.

These barriers, combined with the bargain price of launching, created an opportunity for SpaceX to expand its market share (Figure 5). The company capitalized on this shift by increasing its launch capabilities. By doing it, SpaceX not only secured more contracts but indeed opened the door more widely to the New Space transformation in the satellite segment of the space economy. Since the emergence of Falcon 9, the number of active satellites has accelerated exponentially (Figure 6).

The most momentum of this growth was added by the so-called SmallSat (Figure 7). Although typically defined by mass, small satellites lack a universal subdivision standard, and different sources use varied mass ranges. Here, the FAA classification [92] will be used combined with Bryce Tech’s approach [93]. According to the FAA, small satellites are defined as between 601 and 1200 kg [92] (p. 94). Here, they will be called small satellites sensu stricto. Following Bryce Tech’s approach, the small satellites sensu largo will mean the broad category of all classes of satellites up to 1200 kg, namely comprising femto (0.01–0.09 kg), pico (0.1–1 kg), nano (1.1–10 kg), micro (11–200 kg), mini (201–600 kg), and small satellites sensu stricto (601–1200 kg) [93] (p. 3) ).

The transport platforms—from cars to ships to aircraft—have evolved in size with technological progress, which has also reached the satellites. Breakthroughs in microelectronics and low-cost, high-quality printed circuit board manufacturing and miniaturization have dramatically changed satellite sizes. The rise in small satellites results in the disruption of the tradition of large, expensive spacecraft [94]. The small satellites evolved from university experiments using commercial off-the-shelf (COTS) components dating back to the 1980s. However, before the mid-1990s, only 6% of small satellites launched were used for commercial applications. Since the 2010s, more than 60% of small satellites launched have been used for commercial purposes [95]. The cost-cutting transformation in orbital launching services, driven mostly by SpaceX, has supplemented and reinforced the miniaturization impact. Lowering launching costs opened doors to new business models and innovations [38,55].

Figure 7. Number of small satellites launched globally. Source: own based on [93] (p.8), [96] (p. 7).

Figure 7. Number of small satellites launched globally. Source: own based on [93] (p.8), [96] (p. 7).

Small satellites offer advanced functions at a fraction of the mass and size (cf. Figure 8) of larger spacecraft, allowing cost-cutting. In particular, CubeSat technology was transforming space research and commercial ventures by expanding mission capabilities. CubeSats are built from 10 × 10 × 10 cm units weighing about 1.33 kg each. Their design includes a spacecraft bus/platform and payload/mission hardware [95]. CubeSats tackle tasks once reserved for larger satellites [97]. CubeSats have dominated the smallsats cohort since 2013, when they reached two-thirds of all satellites up to 600 kg and peaked in 2017 with 86% share in this category. This was nearly three-quarters of all small satellites sensu largo [98,99].

Since then, CubeSats’ share has declined due to the rise in larger spacecraft (but still beholden to the smallsats sensu largo) used to form the mega-constellations of telecommunications satellites designed to provide global internet coverage. Previously, satellite internet was the domain of large corporations and governments operating at GEO. SpaceX, with its Starlink, disrupted this model by mass-producing low-cost satellites dedicated to LEO and launching them using its own rockets. Let us compare the data about the changing structure of mass classes of satellites (Table 1). One could notice the huge increase in the share of mini satellites (201–600 kg) in 2020 and 2022 compared to 2018. This was due to the mega-constellation rollout by SpaceX (Starlink, since 2019) and Eutelsat (OneWeb, since 2020). However, in 2023, the share of small satellites sensu stricto (601–1200 kg) was getting pretty close to that of mini ones. This is due to the new generation of Starlink spacecraft rollout, namely V2 mini (about 800 kg), since 2023 [100,101,102].

Figure 8. Decreasing mass and size of launching of satellites in the years 2011–2023 as measured by (a) mass and (b) number of spacecraft per launch. Source: own based on [6,93,96,103].

Figure 8. Decreasing mass and size of launching of satellites in the years 2011–2023 as measured by (a) mass and (b) number of spacecraft per launch. Source: own based on [6,93,96,103].

Table 1. The changing structure of satellite mass classes over time.

Mass Class	Share in Spacecraft Number
	2018	2020	2022	2023
Up to 200 kg	63%	27%	25%	27%
Mini (201–600 kg)	7%	67%	71%	40%
Small (601–1200 kg)	15%	1%	1%	31%
Rest (above 1200 kg)	15%	5%	3%	2%

Note: mass classes based on [92] (p. 94). Source: own based on data from [93,96,98,104].

Table 1. The changing structure of satellite mass classes over time.

Mass Class	Share in Spacecraft Number
	2018	2020	2022	2023
Up to 200 kg	63%	27%	25%	27%
Mini (201–600 kg)	7%	67%	71%	40%
Small (601–1200 kg)	15%	1%	1%	31%
Rest (above 1200 kg)	15%	5%	3%	2%

Note: mass classes based on [92] (p. 94). Source: own based on data from [93,96,98,104].

According to SpaceX and Eutelsat’s bold moves, the commercial satellites’ structure was changed substantially (Figure 9). Both CubeSats and Starlink/OneWeb operate at LEO, thus changing dramatically the structure of the satellite placement as well (

Table 2. The structure of satellites by orbit type in 2011 and 2024.

Orbit	June 2011		June 2024		Dynamics	CAGR
	#	Share	#	Share
LEO	480	50%	8110	92%	1690%	24.3%
MEO	66	7%	199	2%	302%	8.9%
GEO	405	43%	552	6%	136%	2.4%
Total	951	100%	8861	100%	932%	18.7%

Source: own based on data from [54] and [105].

). The revenue from Starlink is now helping to fund SpaceX’s further technological advancements, reducing its reliance on government contracts. The ultimate goal is Starship—a fully reusable super-heavy rocket capable of carrying payloads to orbit and beyond, namely to the Moon and Mars. It will strongly leverage economies of scale due to the huge lift. If, additionally, full reusability is achieved across both stages, launch costs could drop again by an order of magnitude, unlocking entirely new possibilities for the space economy [57].

The space industry has undergone a profound transformation, moving from a landscape dominated by the public sector and a few large government-backed contractors to one fueled by private-sector competition, technological breakthroughs, and new business models. NASA’s partial shift from cost-plus contracts towards a fixed-price model, accompanied by the inflow of private capital into the launch segment (upstream), resulted in the cost-cutting innovations driven by new private players, which are focused not only on government contracts but also on market competition. Furthermore, this cost lowering, accompanied by technological progress and miniaturization, resulted in lowering significant barriers to entry to the satellite segment. Roettgen called this the triple-whammy effect: (1) according to the technological deflation trend, the price of 1 kg of hardware is sharply decreasing, while (2) according to the miniaturization, the capability possible to pack into that 1 kg is rapidly increasing, and finally (3) the price at which that 1 kg could be placed in orbit is steeply declining [59]. Meanwhile, governments’ roles have shifted from sole operators to regulators and facilitators.

From this point of view, the “First Fundamental Theorem of Welfare Economics”, as expressed by [38], proved the superiority of market-driven space activity. However, one with a skeptical mindset would find that in some cases, markets gravitate towards concentration, oligopoly, and even monopoly. And this is precisely the case we observed in just the last few years in the launching segment, where SpaceX reaches about one-half of the market share, as well as in satellites, where the same company completely dominated the commercial satellites with two-thirds of this pie. When we took into account only the relevant market, namely low-latency satellite internet communication, the dominance of SpaceX was overwhelming. Starlink, with 90% of this market, is clearly a monopolist. As we know from economics, when someone has monopoly power, they can use it for any reason and for any purpose.

Starlink’s market position allows Musk’s unilateral decisions with global consequences. In the light of the “First Fundamental Theorem of Welfare Economics”, the concentration of market power in one firm and its discretionary, extra-national power challenge the conditions under which the theorem holds. This power enables coercive bargaining, dismissal of stakeholder concerns, and strategic reliance. For example, such power was on full display in March 2025, during a fierce exchange between Elon Musk and Polish Foreign Minister Radosław Sikorski. Musk claimed Ukraine’s front line would collapse without Starlink. Sikorski fired back, noting Poland pays USD 50 M annually for Ukraine’s access and warning Musk that Poland could seek alternatives. Musk dismissed Poland’s payments as a tiny fraction while personally insulting Sikorski. U.S. Secretary of State Marco Rubio backed Musk, urging gratitude instead of addressing reliability [106]. Overall, the New Space era in its beginning has democratized access to space, intensified competition, and expanded the market’s footprint. However, while SpaceX revolutionized the space economy, its market dominance creates systemic risks due to the monopoly power enabling unilateral actions that transcend commercial considerations (undesired alone) and enter the geopolitical realm. One could note that shortly after that internet dispute, the contract talks between Italy and Starlink, worth USD 1.6 billion, have halted due to controversies surrounding Elon Musk. Italian Defense Minister Crosetto noted that discussions shifted focus from the technology to Musk himself [107].

To summarize the structural considerations, let us turn to the seven distinguishing features of the space industry identified by Gurtuna [88]. By revisiting these features, the aim is to examine how current business practices in the space economy diverge from the earlier ones (

Table 3. Comparison of the space sector across Gurtuna’s 7 features within three periods of time.

Feature	Pre-2013	Nowadays (2025)	Future (2030s)
Cyclical nature	“Boom and bust” cycles driven by government budgets, worsened by long investment horizons and lead times	Shorter horizons due to ROI-focused private investment and agile New Space approaches; new forms of business-driven cyclicality emerge with an influx of private capital	Wider adoption of agile methods (even in gov-led projects) and diversified, global demand may dampen cyclical shocks
Linkage to Defense	Strong dual-use nature; high regulatory friction (e.g., ITAR)	Slightly less dominant due to commercial investments, but dual use persists. Rising geopolitical tensions (e.g., U.S.–China tech rivalry, sanctions on Russia) reassert linkages	Likely intensifies with militarization of space; dual-use technologies continue driving restrictions and strategic control
Government as the Main customer	Government was the dominant customer; few non-gov clients beyond telecom	Governments are still primary buyers, but the commercial customer base is steadily growing	Balanced model: commercial expansion continues, but governments retain an anchor role, especially amid geopolitical stress
The destination problem	ISS was the only routine destination; minimal off-Earth demand	ISS and Tiangong remain the only regular destinations; most demand is Earth-oriented	Potential Moon bases (e.g., Artemis, ILRS) may open new transport and service routes
Limited competition	Few, large, government-backed incumbents	Initial democratization gave way to consolidation of New Space; market power increasingly concentrated (e.g., SpaceX)	New entrants will emerge, but oligopolistic tendencies likely persist in key segments (launch, LEO constellations)
Long investment horizon	Very long project timelines, tolerated by government budgets	Shorter timelines for commercial ventures; science missions and exploration remain long-term	Even gov/military timelines may shorten due to the adoption of New Space practices and modularity
The Curse of the Single Unit of Production	Custom-built systems with no economies of scale	Shift toward standardization and scaling (e.g., Falcon 9, Starlink, OneWeb); beginning of industrialization	Further modularization and mass production of components/platforms; economies of scale increasingly realized

Source: Own based on idea of [88] (pp. 21–25) and [108] (p. 7).

). The comparative framework outlines the evolution of the space economy across three phases—pre-2013 (Gurtuna’s book was published in 2013), the current landscape (2025), and the foreseeable future (2030s)—through the lens of seven features. One could observe a trajectory: from a state-dominated, defense-centric, and slow-moving sector towards a more hybrid ecosystem marked by growing commercialization, diversification of demand, and gradual modularization of technology. Several enduring characteristics—such as the dual-use nature of space technologies, ongoing regulatory constraints, and the strategic role of government—continue to shape companies’ behavior. Nevertheless, the influx of private capital, combined with agile development philosophies, modularization, and cost-cutting orientation, has introduced new dynamics, including shortened investment horizons and standardization efforts. The analysis also highlights a tension between initial democratization and market consolidation, as early competition in the New Space era gives way to oligopolistic tendencies, especially in launch services and satellite internet.

6. Conduct

In the analytical framework, Conduct refers to a firm’s behavioral patterns and strategic choices. These strategies are influenced by the Structure of the industry, but also, in turn, shape that Structure through a feedback loop. Strategies of the sector firms subsequently affect the industry Performance (Figure 2).

The strategic orientation of space companies has shifted significantly in response to the structural transformation outlined in the “Structure” chapter, commonly referred to as the emergence of New Space. To illustrate these changes in a more detailed manner, the strategy canvases were used. The strategy canvas is a diagnostic framework that captures the market’s state of play, allowing one to understand the factors the sector currently competes on and what customers receive from the existing competitive offerings. The strategy canvas captures all this information in graphic form, where the horizontal axis covers the range of factors the industry competes on. The vertical axis relates to the offering level that customers receive across these competing factors. A high score means a company offers buyers more in any particular factor. In the case of cost, however, the interpretation is the opposite; a higher score indicates a higher cost, which translates into a higher price. Using the horizontal and vertical axes, the strategic profile (also known as the value curve) is plotted, namely a graphic depiction of a firm’s or a category of firms’ relative achievement across competition factors [109].

The strategy canvas approach is particularly useful for illustrating how new market entrants differentiate themselves from incumbent firms. In the space launch sector, Traditional Space is typically characterized by well-established government contractors focusing on large, customized missions. At the same time, New Space comprises private entities aiming to reduce costs and shorten development timelines. While still relying to a smaller or bigger extent on the government as a customer, they have widened the door opening access to space for commercial and academic clients. Plotting both segments on the same graph allows one to easily observe core differences in their conduct.

In the case of Traditional Space launchers, they could be profiled across six factors (Figure 10). They offer highly reliable, highly customized rockets for the particular mission, but at a high price (by direct and indirect meaning). The costs of launching are high, which translates to a high direct price for the customer. Moreover, there is also an indirect ‘price’ of this launching model. Traditional Space secures only a low cadence (frequency) of rocket launches, and the lead time for developing rockets is very long. Traditional Space has a fleet of small rockets dedicated to smaller payloads (e.g., SmallSats), but their cadence is even lower and the costs even higher.

While the launch cost of Traditional Space scores high, New Space, by contrast, rates low, indicating a strong emphasis on cost reduction through simpler designs, commercial off-the-shelf components, and, in some cases, reusable hardware. In the most iconic example of SpaceX, their launch costs are far below those of competitors. The reliability factor, a hallmark of spaceflight, is generally high for both segments. However, while Traditional Space rates very high, as mission assurance and testing are central to its legacy model, New Space scores only relatively high, reflecting extensive, iterative testing but also incorporating faster design cycles that, while generally robust, may introduce incremental risks.

Cadence (frequency of launches) contrasts sharply. While Traditional Space rates low, New Space scores very high. Consider Atlas V (Lockheed Martin/ULA) and Delta IV (Boeing/ULA) versus Falcon 9 (SpaceX). Atlas had 101 launches in 2002–2024, and Delta IV had 45 launches in 2004–2024. Falcon 9 has had 454 launches since 2010 up to now [110,111,112]. This translates into the following cadences: 4.59 and 2.25 versus 30.27 launches per year, respectively. Moreover, the cadence of Falcon 9 is continuously growing, and in 2024, it achieved 134 launches [112].

Mission customization is high in Traditional Space, which excels in creating highly bespoke solutions. New Space scores low as it aims for standardized architectures. It focuses on repeatable platforms that can rapidly adapt to varied commercial and research needs without expensive custom builds, enabling mass-manufactured, standardized systems and greater economies of scale. Speed to market, reflecting the timeline from mission conception to launch, is scored low for Traditional Space due to extensive qualification cycles. Lengthy governmental reviews and mission-specific engineering result in slower delivery. In contrast, New Space moves swiftly, employing agile methodologies, rapid prototyping, and commercial production techniques to compress development timelines. Traditional Space acknowledges the role of small satellites but still prioritizes larger, single-payload missions. New Space leans heavily into small satellites with a strongly developed small-rocket segment, and it offers services like SpaceX Transporter and Bandwagon (rideshare missions where multiple, smaller payloads share a single launch) [113].

The seventh factor, reusability, has been absent in Traditional Space since the abandonment of the space shuttle program. However, it is a differentiating factor for New Space. This is scored medium to denote only partial reuse (booster landings) rather than total system reusability.

In the case of Traditional Space satellite producers, they could be profiled across six factors, while New Space firms add an additional seventh factor (Figure 11). First, manufacturing costs hold a stark contrast, with Traditional Space rated high and New Space representing low cost. Traditional satellite development typically involves government-style procurement, mission-specific components, intensive testing, and longer production cycles. In contrast, New Space seeks to minimize costs through standardized platforms, commercial-off-the-shelf sourced components, and agile engineering and manufacturing.

Regarding longevity, Traditional Space scores very high, while New Space scores very low. The established approach prioritizes satellites designed to remain operational for fifteen years or more, justified by large upfront investments, high launch costs, and strict reliability requirements. Conversely, New Space firms often sacrifice longevity. They rely on commercial off-the-shelf components rather than fully customized, space-grade hardware. The durability of such components in harsh orbital conditions is often lower than bespoke systems subjected to rigorous testing standards.

Moreover, higher risk tolerance plays an important role: some companies accept that certain satellites may fail earlier, thus requiring more frequent replenishment, offsetting that risk. Furthermore, New Space focuses on LEO, where atmospheric drag accelerates orbital decay. Many also omit propulsion systems to reduce mass and cost, making orbit maintenance impossible. This lean approach allows rapid deployment, lower expenses, and swift upgrades, but ultimately shortens operational life.

Traditional Space also excels at mission customization, emphasizing highly tailored satellite architectures. Traditional satellites are often purpose-built, reflecting unique government or scientific specifications. New Space highlights the contrasting philosophy, producing batches of similar satellites based on standardized platforms (buses) to decrease costs and accelerate delivery.

The conventional approach to building satellites often involves protracted design phases, meticulous engineering checks, and multiple review gates, typically spanning several years from initial concept through hardware fabrication to fully operational status. Consequently, Traditional Space is rated very low on speed to market. By contrast, given a very high rating, New Space firms substantially compress these timelines by adopting agile development and short development cycles. As a result, satellites can move from design to orbit within a matter of months rather than years, providing greater flexibility, faster feedback loops, and the capacity for more frequent technology upgrades.

The approach to the potential offered by LEO illustrates a pronounced difference between Traditional Space and New Space satellite deployments. This results in a relatively low rating for Traditional Space (which is more GEO- and MEO-focused) and a very high rating for New Space, which is focused on LEOs. Historically, large geostationary satellites dominated the industry, reflecting Traditional Space’s preference for missions with longer operational lifespans. On the other hand, the constellations of small satellites in LEOs have proved advantageous, including reduced launch costs, lower latency for communications, and more frequent revisit times for Earth observation.

Therefore, traditional satellites remain huge, complex, and customized, while New Space focuses on rather small, standardized satellites (including CubeSats). They enable more frequent launches and a constellation-based approach to coverage. This lighter, modular design lowers the barrier to launch and simplifies incremental upgrades, allowing scalability.

Finally, the seventh factor, leveraging a short life cycle as an advantage, is absent in Traditional Space, because it emphasizes longevity. However, it could be seen as a differentiating factor for New Space. Rather than viewing short life cycles as a drawback, many new companies use shorter operational windows for frequent hardware upgrades, which enable them to integrate the latest technology, iterate designs, and thus sustain competitiveness in a dynamically changing high-tech environment.

7. Performance

In the very general meaning, Performance within the S-C-P framework refers to the success of any sector in producing benefits for consumers or society as such [11,12]. Thus, the question is “what society wants from producers of goods and services” [11] (p. 3); what could be seen as a good performance? The most important thing, from the Industrial Organization point of view, is that “decisions as to what, how much, and how to produce should be efficient in two respects: scarce resources should not be wasted outright, and production decisions should be responsive qualitatively and quantitatively to consumer demands” [11] (p. 3). Thus, the crucial terms of the classical S-C-P approach to Performance will be production (or technical) efficiency and allocative efficiency [11,12]. However, assessing these two kinds of efficiency poses particular challenges in the context of the space economy.

Technical efficiency refers to the ability of a firm or sector to maximize output from a given set of inputs (or conversely, to minimize inputs for a given level of output). Looking at Figure 12, one can easily find the general progress in lowering the cost of launching a rocket to LEO calculated per kilogram of payload in both Western and Eastern/Global South countries. Regardless of this progress, SpaceX with Falcon 9 performed a real breakthrough in the efficiency of transporting satellites into orbit. It proved the substantial positive impact of putting the market into the previously government-dominated domain.

A similar, and in fact interconnected, positive impact of the New Space transformation could be observed in the satellite segment, where, due to the lowering of launching costs (Figure 12 and Figure 13a), as well as due to the technical progress (including miniaturization) and business model innovations, the cost of launching satellites into orbit dropped from around USD 40 million to USD 2.5 million per spacecraft (Figure 13b). Again, it proves the economic gains of the structural change due to the emergence of New Space in terms of technical efficiency.

The second crucial category for Performance is allocative efficiency, namely the optimal distribution of resources (which are already produced in a more or less technically efficient way) following societal preferences. It refers to a state in which resources are distributed in a way that maximizes societal welfare. According to neoclassical economics, it could be secured by the equimarginal principle, which means each unit of resources is allocated in such a way that the benefits of transferring such a unit into one use are equal to the harms involved in withdrawing it from another use [117]. In a purely market-driven system, this implies that marginal benefit equals marginal cost for all goods. Thus, competitive markets are assumed to be efficient or Pareto optimal, “when no possible reorganization of production or distribution can make anyone better off without making someone else worse off” [118] (p. 160).

Through its new approach, firms like SpaceX have demonstrated measurable gains in technical efficiency, at least in terms of partial productivity measures such as cost of launch per kilogram. However, on the other hand, market concentration and barriers to entry we observe in the case of launching services (SpaceX with Falcon 9) or satellite constellations (SpaceX with Starlink in telecommunication or Planet Lab in remote sensing) distort allocative outcomes as they fall far away from the competitive ideal. Such dominance by a few actors theoretically could lead to predatory pricing or other undesired behavior due to monopoly power and reduced consumer choice. At the moment, it seems that huge efficiency gains due to the cost-cutting effects of New Space development substantially outperform possible distortions regarding allocative efficiency. For example, customers do not care about monopoly pricing in a situation in which a firm suspected of having monopoly practices, due to disruptive innovations, is able to offer prices many times lower than incumbent competitors, as is the case with launching services by SpaceX.

It would be helpful to refer here to Leibenstein’s (1966, 1979) X-efficiency theory, which challenges the orthodox assumption that firms invariably operate on their optimal production frontiers [119,120]. X-efficiency theory posits that factors such as worker motivation, managerial practices, and organizational structures substantially influence the degree to which firms exploit existing technology and resources [121]. From this perspective, a technically efficient dominating firm may, in certain circumstances, deliver greater net benefits, which would outperform the allocation distortions (also known as deadweight loss) due to monopoly or oligopoly market structure. For instance, New Space firms streamlining processes through programs such as lean production and agile project management, and probably attracting better talent and/or better motivating them, could reduce X-inefficiencies, resulting in higher total efficiency. Leibenstein’s theory underscores the idea that certain forms of monopoly power need not always be counterproductive. For instance, SpaceX has demonstrated superior technical efficiency compared to established players by innovating reusable rocket technology and streamlining manufacturing processes. This has led to significantly lower launch costs, showcasing how a technically efficient “monopoly” in certain launch segments can outperform multiple inefficient competitors. The intriguing question about the long-term net effect of trade-offs between allocative and X-efficiency regarding the New Space transformation remains open for further study. Up to now, however, benefits from gains in technical efficiency improvements seem to be overwhelming in cases such as SpaceX.

Considering public goods led us to the next problem, namely the scope. Should we take the welfare of the national population as the normative baseline (national public goods), or should we think about global scope (global public goods)? For decades, the space economy supplied a lot of uncontroversial global public goods, such as basic science and astronomy data, space situational awareness, and space debris mitigation. On the other hand, we have military surveillance and strategic deterrence, or even building an offensive potential (e.g., anti-satellite weapon—ASAT). Such activities support national security. However, they raise controversies and the fear of an increased risk of global conflict. While they could be perceived as desired goods from the national security perspective (public goods), from the broader global perspective, they are not socially desired (if one could imagine such an abstract construct as a global society). The issue is, however, that there is not a global state yet; thus, there is no organized will for such an abstract construct in the form of a global government. There are also public goods somewhere between these two categories, such as Global Navigation and Timing (GNSS) or space debris active removal. They are both dual-use and dual-scope. Normally, they are very helpful public goods supplied globally. However, they could switch in the case of conflict and become military-use national public goods.

Last, but not least, one could consider externalities. In the space economy, the production of both private and public goods usually produces externalities as well. Externalities in economics refer to the side effects of any economic activity that affect third parties. These can be either positive (when benefits spill over outside the sides of a transaction) or negative (when costs are imposed on others without compensation). Thus, externalities cause a divergence between private and social benefits or private and social costs. In the context of the space economy, externalities are especially salient due to the shared, transboundary nature of space as a domain. Space activities frequently generate both positive externalities, such as technological spillovers and global connectivity, and negative externalities, including orbital debris, radiofrequency interference, and increased geopolitical tensions. These external effects are not priced into the market transactions of space firms or governments. Yet they have profound consequences for third parties—including other states, future generations, and the global public.

8. Discussion

The space sector’s evolution over recent decades can be comprehensively analyzed through the lens of the modified Structure–Conduct–Performance (S-C-P) framework. This approach illuminates not only the conventional industrial economics forces shaping the industry but also the unique astrophysical and geopolitical factors at play.

Outer space creates extremely harsh conditions not only for humans but also for the objects they produce. Orbital mechanics realities—gravity wells, launch energy requirements, and radiation—impose fixed technological thresholds—e.g., the extremely high cost of placing the payload into orbit and the steep reliability standards. These astrophysical constraints raise capital intensity and favor scale economies unmatched in most terrestrial industries.

It was neither the love of knowledge (curiosity) nor the pursuit of profit that initially drove mankind to venture into this harsh domain. The main motivation, which remains mostly influential today, was the desire to dominate or the fear of being subjugated by others. This “original sin”, born of military and geopolitical rivalries, continues to cast a shadow over the evolution of the space economy. Indeed, it seems likely to still be the key driving factor shaping its trajectory for the foreseeable future. Geopolitically, the strategic value of presence in space channels the majority of public space budgets into defense-related programs. This second condition is closely related to the third differentiator of the space economy, namely the state’s outsized presence in the midstream. Governments are the anchor customers (and often the regulators) for satellite operation services such as GNSS, reconnaissance, and deep-space communications. This triad—harsh physics, great-power rivalry, and a state-centric midstream—produces a sector whose traits diverge from conventional industrial–organization baselines.

As government agencies once exerted near-exclusive control over upstream, new entrants—often dubbed “New Space” companies—have begun altering market structures, offering serially produced small satellites, reusable rockets, and lower launch costs. Whereas the initial space economy depended on extensive government contracts under cost-plus systems, contemporary developments are more open to fixed-price models and diversified private funding. New entrants pursue strategies (conduct) that differ markedly from traditional, large-scale, government-backed incumbents. New Space entities like SpaceX and others adopt aggressive cost-reduction measures, high launch cadence, and reusability, challenging long-standing practices of infrequent launches and bespoke engineering. Performance outcomes are mixed: some particular aspects of technical efficiency have risen sharply, but some doubt about market power and negative externalities arises.

As regards performance, some general limitations should be discussed. Data about decreasing costs of launching in total as well as calculated per kilogram of payload mass or per spacecraft cannot give us a full and consistent picture of the technical efficiency because they are only the proxies. To assess technical efficiency in a coherent manner, we need standardized inputs and outputs and clearly defined relations between them based on a given technology (namely, production function). However, these assumptions are deeply challenged in the space economy. Firstly, space products are often non-repetitive and custom-built, which limits the use of benchmarking of productivity comparisons across firms as well as along the timeline.

Moreover, the public sector’s dominance in demand creation (midstream) is responsible for a blurred boundary between political objectives and technical optimization. Space programs could be effective in meeting geopolitical or military goals, but not efficient in a narrow technical efficiency sense, in which they could be perceived simply as a waste. This issue is reinforced by a dual-use logic, where technologies serve both civilian and military functions. This often leads to redundancy in capabilities and suboptimal allocation of resources from a purely economic standpoint, yet these redundancies may be rational from a sovereignty, security, and resilience perspective.

Consider GNSS systems. In fact, a single global system (e.g., GPS) could serve all users, maximizing technical efficiency and clearly eliminating waste. In practice, however, the world hosts four major GNSS constellations: GPS (U.S.), GLONASS (Russia), Galileo (EU), and BeiDou (China). Each was developed not for efficiency but as a hedge against strategic dependence on a foreign system. These navigational constellations are highly capital-intensive, and their coexistence appears inefficient from a narrow market logic. GNSS is crucial not only for civilian navigation but also for precision targeting, military logistics, and intelligence synchronization. In the context of geopolitical rivalry, such redundancy could deepen rather than retreat. The situation is similar, though less mature, in the domain of low-latency satellite internet, currently dominated by SpaceX’s Starlink, thus raising concerns about monopoly power. Therefore, it is not surprising that other major initiatives are planned to catch up: Guowang (China), Amazon Kuiper (U.S.), and IRIS² (EU), which will create an obvious redundancy of satellite infrastructure; however, dozens of thousands of satellites in overlapping orbits [122,123,124]. Again, it will be tremendously costly and environmentally risky (e.g., space debris, light pollution caused by satellite constellations, and increasingly critical for astronomy). Yet, from a security standpoint, relying on a foreign-controlled constellation is increasingly seen as unacceptable, particularly in conflict or crisis scenarios.

Regarding allocative efficiency assessment in the space economy, it can be argued that this criterion, while central to classical industrial organization analysis, may not be fully adequate as the indicator of performance in a sector as unique as the space economy. The key role of the production of public goods should also be considered and balanced. These outputs are non-rivalrous and non-excludable, making it unclear what an “optimal” allocation would look like in competitive market terms, because, in such cases, allocative efficiency cannot be judged solely through price signals or market outcomes. Considering space’s role in national security and geopolitical conditions, resource allocation often reflects strategic priorities rather than consumer preferences or willingness to pay.

An additional problem is the absence of global governance, while space exploration and exploitation have global consequences by definition. It means there is no shared benchmark for common performance assessment. There is no shared antitrust framework for cross-border oligopolies or monopolies. The trade-offs between economic efficiency and the production of public goods are complicated issues as such. However, they are becoming even more complicated, considering the potential conflict between national and global perspectives. The dominance of firms like SpaceX may denote monopoly power in the hands of one controversial man for other countries; however, for Americans, it could strengthen their public good in the form of national security and geopolitical leverage. State control over space infrastructure and its supply could not be the most economically efficient, but for the Chinese, it could be the way to demonstrate civilizational leadership in space. In the absence of the global state, each nation defines welfare in its own way. Thus, it is not possible to reduce space economy performance to a common denominator. Therefore, the traditional Industrial Organization goal, namely minimizing market power to maximize consumer surplus and secure social welfare, loses clarity in a setting where market power benefits one nation but harms another.

Finally, let us look at the limitations of this study as such. This review synthesizes secondary sources and industry statistics; it does not supply any original datasets or new empirical tests of the modified S-C-P model. Therefore, descriptions of structure, conduct, and performance remain illustrative rather than rigorous assessments of inferences among the elements of the modified S-C-P framework.

Regarding performance, assessing technical and allocative efficiency in the space economy would ideally require standardized input–output datasets and a uniform production function, conditions that do not exist. Some limited numbers regarding technical efficiency were presented; however, they should be treated only as proxies. As a result, statements about X-efficiency gains or potential welfare losses from concentration remain qualitative rather than econometrically validated.

Given the specificity of the space economy, the performance assessment should go beyond efficiency. However, the paper does not compute any universal social welfare measures. National security benefits, public good outputs, and global externalities cannot be collapsed into a single welfare metric; any performance judgment inevitably reflects implicit value choices.

Readers should also be aware that although major space powers are covered in the study, data availability—mainly releases by U.S. and European institutions and large Anglophone commercial providers—skews the perspective toward U.S. and allied programs, providing only limited insight into China, Russia, India, and emerging actors with much less transparent reporting. As a result, the structural and conduct patterns derived here may underestimate non-Western launch capacity, alternative financing models (e.g., state-owned conglomerates), and region-specific regulations. Therefore, generalizing the modified S-C-P conclusions beyond the triad (U.S.–EU–Japan) context should be performed cautiously.

This paper should be treated as a preliminary, interdisciplinary, and descriptive study of the space economy through the lens of the modified S-C-P framework. The limitations listed above could be justified at this stage. However, attempts to mitigate them will be welcomed. Addressing the above limitations will require new data collection and tailored analytical tools. The following avenues of future research are essential to incorporate more scientific rigor.

Firstly, attempts to build comprehensive and comparable datasets will be welcomed both at the national and firm levels. This could allow using the standardized quantitative metrics regarding structure (e.g., Herfindal–Hirschman index), conduct (e.g., harmonized cost breakdowns, utilization rates), and performance (e.g., comparable inputs and outputs datasets allowing estimation of production function or total-factor-productivity indices). Secondly, empirical testing will not only require comprehensive and comparable data but also a new analytical tool. The great challenge will be constructing a multi-criteria performance index that weights economic efficiency, public good provision, and national-security value. Thirdly, future research would benefit from multilingual data collection. Thus, to expand geographic coverage, future studies should attempt to compile the Mandarin, Russian, and Hindi language literature, including the “grey” literature. International partnerships with regional researchers and analysts to validate and interpret such sources would be a great idea. Addressing these topics will be a challenge. However, pursuing these research paths would supply the primary evidence, quantitative rigor, and global balance needed to test—and refine—the modified S-C-P framework proposed in this review. It would solidify the analytical bridge between industrial-organization theory and the distinctive realities of the space economy.

9. Concluding Remarks

In sum, the economic and social aspects of the space sector’s development are rooted in the tension between national sovereignty, commercial innovation, and public good functions. The S-C-P framework highlights how structural conditions—set by physics and global politics together with the demand (still driven mainly by the governments) and supply—shape firms’ conduct, which in turn influences overall performance. Yet, conventional measures of efficiency only partially capture the reality of the space economy. Public goods, externalities, and dual-use military considerations often override simple market signals. As more stakeholders—nations with their governments, as well as commercial firms —engage in space, crafting effective governance that balances innovation with safety, competition with security, and national interests with global collaboration remains a pivotal challenge. One can imagine two possible normative anchors. In a pluralistic global view, performance could be defined as maintaining global public goods: orbital sustainability, peaceful use, and shared access. However, this requires institutional coordination and trust, which are currently in decline. An alternative anchor could be strategic national performance aligning with state-level objectives, e.g., control of space infrastructure, industrial capability, and resilience in conflict.