Innovation Begets Innovation and Concentration: The Case of Upstream Oil & Gas in the North Sea

51 Pages Posted: 1 Jun 2022

See all articles by Michele Fioretti

Michele Fioretti

Department of Economics, Sciences Po-CNRS

Alessandro Iaria

University of Bristol

Aljoscha Janssen

Singapore Management University; Research Institute of Industrial Economics (IFN)

Clément Mazet-Sonilhac

Sciences Po; Banque de France

Robert K. Perrons

affiliation not provided to SSRN; Queensland University of Technology

Date Written: May 26, 2022

Abstract

We investigate the effect of technology adoption on competition by leveraging a unique dataset on production, costs, and asset characteristics for North Sea upstream oil & gas companies. Relying on heterogeneity in the geological suitability of fields and a landmark decision of the Norwegian Supreme Court that increased the returns of capital investment in Norway relative to the UK, we show that technology adoption increases market concentration. Firms with prior technology-specific know-how specialize more in fields suitable for the same technology but also invest more in high-risk-high-return fields (e.g., ultra-deep recovery), diversifying their technology portfolio and ultimately gaining larger shares of the North Sea market. Our analyses illustrate how technology adoption can lead to market concentration both directly through specialization and indirectly via experimentation.

Keywords: innovation, adoption, market structure, competition, specialization, experimentation, upstream oil and gas markets, North Sea

JEL Classification: O33, Q40, D40

Suggested Citation

Fioretti, Michele and Iaria, Alessandro and Janssen, Aljoscha and Mazet-Sonilhac, Clément and Perrons, Robert K., Innovation Begets Innovation and Concentration: The Case of Upstream Oil & Gas in the North Sea (May 26, 2022). Available at SSRN: https://ssrn.com/abstract=4120800 or http://dx.doi.org/10.2139/ssrn.4120800

Michele Fioretti

Department of Economics, Sciences Po-CNRS ( email )

28 rue des saints peres
Paris, 75007
France

Alessandro Iaria (Contact Author)

University of Bristol ( email )

12A Priory Road
Bristol, Avon BS8 1TB
United Kingdom
BS8 2EW (Fax)

Aljoscha Janssen

Singapore Management University ( email )

Li Ka Shing Library
70 Stamford Road
Singapore 178901, 178899
Singapore

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Clément Mazet-Sonilhac

Sciences Po

28 Rue des Saint-Peres
Paris, Paris 75006
France

Banque de France

Paris
France

Robert K. Perrons

affiliation not provided to SSRN

Queensland University of Technology

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