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

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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.

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  • Janssen, Aljoscha, 2022. "Innovation Begets Innovation and Concentration: The Case of Upstream Oil & Gas in the North Sea," Working Paper Series 1431, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:1431
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    More about this item

    Keywords

    Innovation; Adoption; Market structure; Competition; Specialization; Experimentation; Upstream oil and gas markets; North Sea;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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