CRIEFF Discussion Paper Number 0507
Independents Abroad: the pursuit of expansion by independent oil companies into non-traditional petroleum countries
Gavin C. Reid, Torcail M. Stewart
Abstract
This paper looks at oil Independents, and potential
disabilities on organizational performance which may arise when
internationalization is contemplated. The
evidence used is field work based, and uses sub-samples of British and North
American oil Independents. It is argued,
on the basis of grounded evidence, from field work interviews, that companies
which do not internationalize, may be constrained by resource weaknesses,
rather than by satisfactory strength within domestic territories alone.
These weaknesses may rise from an unwillingness to
confront the ambiguity of rules, regulations and mores of non-Western
countries. Personal attitudes, beliefs, political affiliations, spheres of
influence, and so on, may be more important to success in non-Western
territories, than more familiar notions of business strategy and organizational
competence. This is because, in the
‘non-ideal’ functioning of the non-Western context, decisions are relationship
based, rather than based on formal modes of selection.
It is shown how Independents have an advantage over
Majors in decision-making speed, the authority to commit, the
seniority of personnel and the establishment of relationships. This translates
into relative success in applying for licenses in non-Western countries.
Because of such capabilities, the Independents are more able to target
non-traditional, under-explored overseas areas.
Indeed, they display an active willingness to engage with countries in
which they will encounter relatively high political and/or security risks (e.g.
as rated by the IMF Political Stability index).
JEL Classifications
D8, L1, L7, L71, M21
Keywords
independent oil companies; petroleum industry; negotiation; non-traditional
contracting; political risk
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