Summary: Proposed legislation to establish the Space Industrializaton Corporation also addresses the important issues of reasearch and development and the approporiate role for the Federal Government in fostering and enhancing technological transfer and innovation while maintaining the integrity of the Nation's free enterprise system. Space industrialization embraces three broad areas: information, or information services; maunfacturing; and energy. If space industrialization is to fully mature, a wide range of opportunities must be identified which are unique to space; economically viable, and in which entrepreneurs, industries, and nations are willing to invest. To date, only communications meets this criteria. Both manufacturing and energy are in very early stages of research. The Space Industrialization Corporation could fill much of the capital formation shortfall utilizing private sector criteria for their venture capital investments. The essential criteria required by private venture capitalists are applicable to the Space Industrialization Corporation, also a venture capital company. As such, it is unique in that it would provide early rounds of high risk capital that the existing venture capitalists cannot afford. If the Space Industiralization Corporation is to become a reality, the three basic principles to be followed for success are: (1) utilize private sector criteria in selecting, analyzing, and investing in business opportunities; (2) require coinvestments from private sources, but not be the final decisionmaker; and (3) clearly define goals to include the transfer of existing Government-developed technology to the private sector as well as providing for the development and transfer of new technology. GAO believes the success of the Space Industrialization Corporation will depend on its ablilty to support sound business opportunities quickly after its inception, and to establish a profit-making record as early as possible. GAO fully supports the concept of Federally assisted business development, but would not want unnecessary duplication at taxpayers expense.
