Small, technology-based firms in the UK oil and gas industry : Innovation and internationalisation strategies

Keogh, William and Jack, Sarah L. and Bower, D. Jane and Crabtree, Elisabeth (1998) Small, technology-based firms in the UK oil and gas industry : Innovation and internationalisation strategies. International Small Business Journal, 17 (1). pp. 57-72. ISSN 0266-2426

Abstract

PROFESSOR WILLIAM KEOGH HOLDS THE Brisco Chair in Entrepreneurial Studies at Robert Gordon University, Aberdeen, Scotland, Dr. D.Jane Bower is managing director of Kinnell Technologies, Edinburgh, Scotland, Sarah L. jack is a lecturer in the Centre for Entrepreneurship, Aberdeen University, Scotland, and Elisabeth Crabtree is currently a technology transfer specialist with the oilfield services corporation, NOWSCO Well Service, Calgary, Alberta, (aniada. Owing to the pressures in their operating environment, small, innovative, technology-based oil-related firms (STBORs) which have grown up around the North Sea coast of Scotland are being driven to consider internationalisation as one possible means of survival. The pressures organisations face include changes in contracting arrangements in the UK uLpstream oil and gas industry which have led to altered relationships between companies at all levels, including the STBORs who provide maniy innovative products and services to the industry. The nature of the oil industry intensifies the relevance, importance and necessity to manage relationships at all levels; it is a highly sub-contracted industrv with high safety and reliability requirements. Managing these relationships, forginig new links and stimulating new developments involves a degree of trust and dependability. In some cases, these small companies are Hio longer able to deal with their traditional customers. Instead, thev mntust pursue anlle create new relationships with firms who historically have not collaborated in innovation with smaller organisation s. This also affects the natture of the innovationi process, which is of vital importance to STBORs. A model is presented which considers these factors and the effects pressures within the industry have had on howy small organisations cope. Although internationalisationi may appeal to he a desirable option, it can prove more coinplex than initially anticipated by thte STBORs. Thiere are issues of scarce i-esources, internal ancl external pressures, andl deterininin-g the most. appropriate internationalisatiorn strategy to adopt. Various intern-ationial strategies lhave been adopted internationial office, acquisition/mergel, establisling an alliance, and co-developr-nent prijecls. Although the supply side has not traditionally beeni cornsidered as anl initegral part of the internationalisation process, it is clear from the reports of the companies studied that the problems and approaches to sourcing internationally are intimately related to the selling side of the business. At least one STBOR in this study was beginning to develop a complex strategy of international outsourcing to complement its UK-based capabilities. The long-term aim of these small firms involved in this exploratory study is to establish themselves in a global market, while surviving in an increasingly constrained local market. This paper seeks to analyse the difficulties they have experienced, particularly in terms of their relationships with larger organisations, and the strategies adopted by STBORs to overcome such difficulties, maintain innovative capacity and establish themselves internationally.