Breaking up global value chains: Evidence from the global oil and gas industry

    Research output: Contribution to journalArticle

    1 Citation (Scopus)

    Abstract

    This chapter examines the oil and gas industry and the efficacy of vertical integration strategies. Using multiple theoretical lenses ranging from the resource-based view, transactions costs, and parenting perspective, the chapter considers different arguments associated with vertical integration. The 2011 breakup of ConocoPhillips and its global value chain helps address the question of which strategy is best integrated or nonintegrated. We provide several conclusions about the structure of integration and value chains within the oil and gas industry. First, vertical integration based on the physical transfer of products between value chain activities will generate little firm advantage in the form of classical integration benefits, such as control over input quality or speed to market. Second, competing across the industry value chain as a hedge or strategy against industry cyclicality is not theoretically defensible. Third, pure play industry specialists can create value through management focus, agility, and, transparency for investors. Fourth, firms that compete across a wide range of industry value chain activities can create value-adding corporate strategies if they are able to leverage knowledge and assets across different industry sectors.

    Original languageEnglish (US)
    Pages (from-to)55-80
    Number of pages26
    JournalAdvances in International Management
    Volume30
    DOIs
    StatePublished - 2017

    Fingerprint

    Global value chains
    Industry
    Oil and gas industry
    Value chain
    Vertical integration
    Agility
    Integrated
    Transaction costs
    Product value
    Assets
    Efficacy
    Cyclicality
    Resource-based view
    Transparency
    Hedge
    Leverage
    Corporate strategy
    Investors
    Parenting

    Keywords

    • ConocoPhillips
    • oil and gas
    • value chains
    • Vertical integration

    ASJC Scopus subject areas

    • Business and International Management

    Cite this

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    abstract = "This chapter examines the oil and gas industry and the efficacy of vertical integration strategies. Using multiple theoretical lenses ranging from the resource-based view, transactions costs, and parenting perspective, the chapter considers different arguments associated with vertical integration. The 2011 breakup of ConocoPhillips and its global value chain helps address the question of which strategy is best integrated or nonintegrated. We provide several conclusions about the structure of integration and value chains within the oil and gas industry. First, vertical integration based on the physical transfer of products between value chain activities will generate little firm advantage in the form of classical integration benefits, such as control over input quality or speed to market. Second, competing across the industry value chain as a hedge or strategy against industry cyclicality is not theoretically defensible. Third, pure play industry specialists can create value through management focus, agility, and, transparency for investors. Fourth, firms that compete across a wide range of industry value chain activities can create value-adding corporate strategies if they are able to leverage knowledge and assets across different industry sectors.",
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