Technological innovation strategy in natural resource based industries

This thesis analyses innovation and technology strategy within a primary industry, notably the upstream oil and gas industry. Industries that exploit and produce finite natural resources are challenged by specific external risks that do not receive much attention from management literature otherwise, especially with regard to organizational innovation behaviour, and thus merit such research focus. On one hand, primary sector firms are confronted with exhaustible nature of finite natural resources. On the other hand, those finite natural resources are fixed to certain locations and companies have to operate in numerous countries in order to exploit resource deposits. In this context, they are often confronted with tremendous socio-political constraints that may have a negative impact on their businesses. This research work raises questions specific to natural resource based industries, notably (1) how can firms defend or even expand their competitive position when they are challenged by the depletion of their core resources? How can firms compensate for an exhaustible resource? (2) How do we evaluate contingencies like political risk for competitive advantage and what role does innovation play in this context? This dissertation takes the format of a "compilation thesis", in this case, three compiled articles. Within the first paper we focus on the resource based view (RBV), a central theoretical approach in management science, which explains how unique firm resources and capabilities contribute to value creation and lead to sustained competitive advantage. We1 apply the assumptions of RBV to the context of finite natural resources and ask if its analytical power is sufficient to explain competitive advantage of companies active in the primary sector, such as hydrocarbon and ore production. Paper 2 analyses how firms respond to geophysical constraints, such as natural resource depletion, and how these depletion issues affect organizational capability building and operational performance in terms of resource exploration and recovery. Paper 3 asks if political risk as external threat influences firm technology and innovation strategies. We find that time horizons of political risk play an important role and analyse why mid-and long term threats positively influence the development of technology and innovation strategies. The dissertation makes several important contributions. First, it contributes to our understanding of innovation and technology strategy within a natural resource based industry. Second, the idea that finite natural resources with their exhaustible nature are different than the "usual" resources investigated by RBV is novel. Third, the analysis also shows how RBV applies to natural resources extracting industries, and how RBV would gain in explicatory power if it was able to integrate factors like "geophysical constraints" and 'exposure to political risk' into the approach. Fourth, the thesis applies RBV and capability approaches to