Technological regime and technological catch up in resource

Technological regime and technological catch up in resource based industries: Case study of oil and gas industry using patent data A methodological discussion by: Ali Maleki Institute for study of science, technology and innovation Edinburgh University

Outline • • • Motivation and background Theoretical background Research questions Analytical framework Research methodology

Motivation and background • Natural resources and economic growth – Resource curse thesis – Lower rate of economic growth – Dutch disease, political conflicts, corruption and war • Technology and economic growth – New growth theory – Evolutionary theory of economic change – Knowledge based economy • Technology, knowledge and economic growth in resource based industries and countries: An unexplored research area? ? ? – Exhaustibility of resources and sustainability of technology and innovation capabilities – Global economy and changing terms of trade – Global value chains and division of innovative labour • A growing research agenda

Observations, and broad questions • Empirical observations – – Diverse range of historical and recent examples Success: US, Norway, Scotland, Botswana, Chile Failure: Nigeria, Angola, Middle range: Iran, Algeria, Saudi Arabia • Broad questions in this emerging area – Why and how a handful of countries did manage to technologically catch up in oil and gas industry while many others did not? What is the role of technological underpinning of the industry – The knowledge and technology in resource based indutries – Some cases studies – Lack of general understanding of major driving or blocking factors for technological catch up at industry level

Research Questions • To what extent (if any ) resource based industries does the potential for innovative knowledge and technology based development? – Exploring the technological diversity of the value chain of upstream oil and gas industry and its spill over potential effects • To what extent (if any) technological regimes in resource based industries could explain patterns of technological catch up by latecomers to this global industry ? – Patterns of technological catch up • • Occurrence and speed of technological catch up by country Role of different types of actors during catch up process. Role of knowledge spillovers from forerunners Point and degree of vertical integration in the value chain – Different dimensions of technological regime of the industry • How may the local sectoral systems of innovation facilitate or obscure the technological catching processes when technological regimes allow for that to happen? – The nature of demand – The role of policy

Literature Review • Catching up: Sectoral and technological – Explaining catching up processes – Mostly based on the experience of NICs in East Asia (Resource poor) – Mostly based on new high tech industries such as ICT • • Technological regimes – the particular knowledge environment where firm problem-solving activities take place : similar for the firms operating in the same market – Developed to explain different patterns of innovation across firms and industries: ex. entrepreneurial vs. cumulative – They may impose constraint on the pattern of innovation emerging in an industry TR across countries – In the same TR, patterns of innovation is expected to be invariant across countries. – But, exploiting opportunities is less similar among countries – Country specific patterns of innovation

Technological Regimes and catching up • “Malerba and Orsenigo have also acknowledged that there may be country-specific patterns of innovation. And these are related to the existence of the major difference between countries in their historical industrial development, in the competence and organization of their firms, and in the architecture and policies of their specific national innovation. Malerba and Orsenigo argued that technological imperatives and technology-related factors such as technological regimes play a major role in determining the specific pattern of innovative activities of a technological class across countries and that within these major constraints identified by technological regimes country-specific factors introduce differences across countries in the pattern of innovative activities for specific technological classes. ” (Park & Lee, 2006) • Under certain Technological Regimes catching up behavior is expected more than others. – Ex. : Less cumulativeness and more predictable TR, catching up is more likely • Grand Hypothesis: TR matters for Technological catching up. – Ex. Leapfrogging argument (Preze and Soete, 1998)

Established factors of Technological regimes • As a particular combination of four key factors – Technological opportunities’ conditions may depend on the extent to which a technological sector can draw from the knowledge base, the technological advances of its suppliers and customers, and major scientific advances in universities. – Appropriability: patents, secrecy, lead times, costs and time required for duplication, learning curve effects, superior sales efforts, and differential technical efficiency due to scale economies – Cumulativeness: The degree to which the development of new knowledge are based on the accumulation and mastery of old knowledge from the cognitive perspective – Knowledge base properties: Specificity, tacitness, complementarily, and independence

Catching up related dimensions of TR • Different from the standard dimensions • Relative technological cycle time (speed of obsolescence of knowledge). – Technological cycle time is measured by the time span between the predecessor and the successor and is calculated as the time difference between the application year of the citing patent and that of the cited patents, to be normalized for inter class comparisons. • Accessibility to external knowledge flows – Access to the knowledge base, or spillovers from the core, is here measured by the proportion of citations by catching up countries to forerunners countries’ patents out of total citations in a class

Catching up related dimensions of TR (Cont. ) • Initial stock of accumulated knowledge – considering the situation of catching-up economies, the knowledge gap with advanced countries for every technological sector must also be addressed. The larger the gap, the more difficult it is to catch-up – The measure of this variable is the total number of the patents in each class normalized by the total number of the patents in all classes of the industry • Uncertainty (fluidity) of a technological trajectory • In the technologies at their early stages, it is difficult to predict how the technologies will evolve in the future, and we can say that the level of uncertainty is greater – Uncertainty of class i = (Maxi – Mini)/AVGi for each class i, – where Maxi is the number of patents in a class i in the year when largest number of patents were recorded during a given period, Mini the number of patents in a class i in the year when the smallest number of patents were recorded during the given period, and AVGi the average number of patents in a class i per year during that period.

Sectoral systems of innovation • Structure of the value chain – Operators ( IOCs and independents) – Integrated service companies – Supply and Service companies • Nature of the industry – Global value chains and global sourcing and user of diverse range of technologies – Structural change in 1970 s – Highly politicized industry • Different levels of technological capabilities in catching up countries – Ownership (legal Dealing with the owner of the technology) – Production: System Integration • Operation ( of installed integrated technology) • Development ( Application and integration of the others ‘technology) – Service and Supply • Production of good and services • Innovation

A typology in local systems of innovation Knowledge intensity Resource intensity 1 -Contradication Resource intensity 2 -Co- existence Resource intensity 3 -Co-evolution

The role of user producer interaction and risks of technological catch up • Even in enabling technological regimes, technological catch up would not occur unless an enabling local systems of innovation provides complementary assets and reduce the risks of innovation processes • Two main risks associated for technological catch up by latecomers (Lee et al. , 2005). – The risk of choosing right technology which is function of technological regimes – of initial market to commercialize it • For catching up ‘collective dynamic risk’ produced by the inter -dependence of risks associated with different players in the system matter. • Example of collective dynamic risk in user producer interactions in upstream oil and gas industry: An enclave type industry • Higher degree of risks in Cops types industries

Research Methodology • Quantitative – Identification of related patents • Keyword based strategies • Correspondence tables • Current indexing systems: Derwent – Measures of patterns of technological catch up • • • Patent counts, relative shares Occurrence and speed in lifecycle of industry catch up Patterns of classes Patterns of actors Value chain and degree of vertical integration in innovation – Measures of dimensions of technological regimes – Regression analysis • Qualitative – Secondry data and literature – Interviews with key informants of the industry

Patent Data • Derwent class and Manual codes based on the value chain • H: PETROLEUM – H 01 CRUDE OIL AND NATURAL GAS • • • H 01 -A EXPLORATION H 01 -B DRILLING H 01 -C WELL COMPLETION, STIMULATING, AND SERVICING H 01 -D PRODUCING H 01 -E TREATING AND TESTING H 01 -F NATURAL GAS H 01 -G EXTINGUISHING OIL WELL FIRES H 01 -H WELL KILLING H 01 -P OIL AND GAS WELL PIPES H 01 -R DEPLETED OIL/GAS FIELDS – H 02, …. . Downstream