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Learning by Drilling: Interfirm Learning and Relationship Persistence in the Texas Oilpatch

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  • Ryan Kellogg

Abstract

This article examines learning-by-doing that is specific not just to individual firms but to pairs of firms working together in a contracting relationship. Using data from the oil and gas industry, I find that the productivity of an oil production company and its drilling contractor increases with their joint experience. This learning is relationship-specific: drilling rigs cannot fully appropriate the productivity gains acquired through experience with one production company to their work for another.This result is robust to ex ante match specificities. Moreover, producers' and rigs'contracting behavior is consistent with maximization of relationship-specific learning's productivity benefits. Copyright 2011, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/qje/qjr039
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Bibliographic Info

Article provided by Oxford University Press in its journal The Quarterly Journal of Economics.

Volume (Year): 126 (2011)
Issue (Month): 4 ()
Pages: 1961-2004

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Handle: RePEc:oup:qjecon:v:126:y:2011:i:4:p:1961-2004

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  1. Jovanovic, B. & Nyarko, Y., 1996. "Learning by Doing and the Choice of Technology," Working Papers 96-25, C.V. Starr Center for Applied Economics, New York University.
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  9. A. M. Spence, 1981. "The Learning Curve and Competition," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 49-70, Spring.
  10. Robert S. Huckman & Gary P. Pisano, 2006. "The Firm Specificity of Individual Performance: Evidence from Cardiac Surgery," Management Science, INFORMS, vol. 52(4), pages 473-488, April.
  11. Prendergast, Canice, 1993. "The Role of Promotion in Inducing Specific Human Capital Acquisition," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 523-34, May.
  12. Kenneth S. Corts, 2004. "The Effect of Repeated Interaction on Contract Choice: Evidence from Offshore Drilling," Journal of Law, Economics and Organization, Oxford University Press, vol. 20(1), pages 230-260, April.
  13. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  14. C. Lanier Benkard, 2004. "A Dynamic Analysis of the Market for Wide-Bodied Commercial Aircraft," Review of Economic Studies, Oxford University Press, vol. 71(3), pages 581-611.
  15. Stokey, Nancy L, 1988. "Learning by Doing and the Introduction of New Goods," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 701-17, August.
  16. Rebecca Achee Thornton & Peter Thompson, 2001. "Learning from Experience and Learning from Others: An Exploration of Learning and Spillovers in Wartime Shipbuilding," American Economic Review, American Economic Association, vol. 91(5), pages 1350-1368, December.
  17. Irwin, Douglas A & Klenow, Peter J, 1994. "Learning-by-Doing Spillovers in the Semiconductor Industry," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1200-1227, December.
  18. Wiggins, Steven N & Libecap, Gary D, 1985. "Oil Field Unitization: Contractual Failure in the Presence of Imperfect Information," American Economic Review, American Economic Association, vol. 75(3), pages 368-85, June.
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Cited by:
  1. Machikita, Tomohiro & Ueki, Yasushi, 2012. "Impact of Production Linkages on Industrial Upgrading in ASEAN, the People’s Republic of China, and India: Organizational Evidence of a Global Supply Chain," ADBI Working Papers 399, Asian Development Bank Institute.
  2. Ryan Kellogg, 2010. "The Effect of Uncertainty on Investment: Evidence from Texas Oil Drilling," NBER Working Papers 16541, National Bureau of Economic Research, Inc.
  3. Chad Syverson, 2010. "What Determines Productivity?," NBER Working Papers 15712, National Bureau of Economic Research, Inc.
  4. Lucas W. Davis, 2012. "Prospects for Nuclear Power," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 49-66, Winter.
  5. Gil, Ricard & Marion, Justin, 2009. "The Role of Repeated Interactions, Self-Enforcing Agreements and Relational [Sub]Contracting: Evidence from California Highway Procurement Auctions," University of California Transportation Center, Working Papers qt66z0w84p, University of California Transportation Center.
  6. Enghin Atalay, 2012. "Materials Prices and Productivity," Working Papers 12-11, Center for Economic Studies, U.S. Census Bureau.
  7. Peng, Ling & Hong, Yongmiao, 2013. "Productivity spillovers among linked sectors," China Economic Review, Elsevier, vol. 25(C), pages 44-61.
  8. Osmundsen, Petter & Roll, Kristin Helen & Tveteras, Ragnar, 2012. "Drilling speed—the relevance of experience," Energy Economics, Elsevier, vol. 34(3), pages 786-794.
  9. Osmundsen, Petter & Roll, Kristin Helen & Tveterås, Ragnar, 2010. "Faster Drilling with Expercience?," UiS Working Papers in Economics and Finance 2010/7, University of Stavanger.

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