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

Michele Fioretti, Alessandro Iaria (), Aljoscha Janssen (), Robert Perrons () and Clément Mazet-Sonilhac ()
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Alessandro Iaria: University of Bristol [Bristol]
Aljoscha Janssen: SIS - Singapore Management University
Robert Perrons: QUT - Queensland University of Technology [Brisbane]
Clément Mazet-Sonilhac: Centre de recherche de la Banque de France - Banque de France, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique

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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: Market structure; Competition; Specialization; Experimentation; Upstream oil and gas markets; North Sea; Innovation; Adoption (search for similar items in EconPapers)
Date: 2022-05-24
New Economics Papers: this item is included in nep-com, nep-ene, nep-reg and nep-sea
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03791971v1
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Working Paper: Innovation Begets Innovation and Concentration: the Case of Upstream Oil & Gas in the North Sea (2022)
Working Paper: Innovation Begets Innovation and Concentration: the Case of Upstream Oil & Gas in the North Sea (2022)
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